Weak Gaza economy crippled by high unemployment: IMF

ANKARA

REUTERS Photo

Palestine’s weak economy remains crippled by high unemployment amid embargoes and intermittent war, the International Monetary Fund (IMF) said in a report on June 18.

An IMF mission led by Christoph Duenwald visited East Jerusalem and Ramallah from June 10 to 18 to assess recent economic developments in the West Bank and Gaza and the financial situation of the Palestinian Authority.

After his visit, Duenwald said in a statement that unemployment rates are dangerously high, reaching up to 42 percent in Gaza and 16 percent in the West Bank.

“Prospects for GDP growth in 2015 are subject to considerable uncertainty, with numerous risks calling for a cautious policy stance. Assuming the political status quo, growth in the West Bank is projected to slow to 2 percent, from 5 percent in 2014,” Duenwald said.

Real GDP growth for the West Bank and Gaza is therefore set to reach 3 percent in 2015, barely sufficient to absorb new entrants into the workforce in a youthful population.

Inflation is projected to remain low, in line with subdued inflation in Israel.

The main risks to the outlook include Palestine’s potential inability to withstand spending pressures and shortfalls in revenue or donor aid. In addition, the country faces a potential large financial liability related to litigation in a U.S. court.

Duenwald said an ambitious fiscal structural reform agenda will be instrumental in mobilizing additional, much-needed donor budget support.

“In this volatile environment, safeguarding financial stability remains an essential priority. The banking sector appears robust and well capitalized, with continued low non-performing loan ratios and high levels of liquidity,” he said.

Meanwhile, the Gaza Chamber of Commerce said the embattled Gaza Strip has welcomed the holy month of Ramadan “jobless and “foodless.” 

”Gaza, home to 1.8 million people, welcomes Ramadan under the shadow of the suffocating nine-year Israeli blockade, in addition to the disaster of last year’s attack,” the statement read. 

Unemployment in Gaza has risen to 55 percent, it said, putting the figure above the IMF calculation.

Some 39 percent of the population live under the poverty line, it also said. 

There has been no surge in market activity despite Ramadan, a traditional month of high sales, the chamber said, citing the destruction of the 51-day Israel attacks in 2014, which cost thousands of jobs and led to enormous destruction in Gaza. 

Meanwhile, the U.N. has closed the last remaining shelter for Palestinians displaced in last summer’s war in Gaza, its spokesman announced on June 19, with families now having to seek temporary accommodation elsewhere.

The July-August conflict between Israel and Islamist movement Hamas, which rules the Gaza Strip, left 100,000 Gazans homeless and forced many to seek refuge in schools belonging to the U.N.’s Palestinian refugee agency, UNRWA.

“Some 30 families left the shelter of the Bahrain school [in western Gaza City], where up to 1,100 displaced people had been living,” UNRWA spokesman Adnan Abu Hasna told AFP.

The Israeli embargo on Gaza began in 2006, following the election victory of the Islamist Hamas organization.