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World Bank warns of dire outlook for Palestinian economy
Thu Mar 16, 10:19 AM ET
The Palestinian economy risks implosion from an Israeli crackdown and threatened cuts in foreign aid following the election victory of hardline group Hamas, the World Bank said.
In the worst-case scenario, it said in a report for donor countries, unemployment among Palestinians will jump to about 40 percent this year and the percentage of those living below the poverty line will rise to 67.
The World Bank outlined four scenarios, with the worst and most likely being that Israel continues to withhold tax revenues owed to the Palestinian Authority (PA) and that Western governments cut their budget support.
Even under the best and improbable scenario of no abrupt change in funding for the PA, "Palestinian economic prospects are not good", the report said.
It noted that donor countries believe that growth in Palestinian gross domestic product (GDP) must reach 10 percent a year just to bring rampant unemployment down to acceptable levels.
But even with the most optimistic projections, the Bank sees growth in Palestinian GDP per capita falling from 6.3 percent last year to 4.9 percent in 2006, and then turning negative in subsequent years.
Continued Israeli withholding of PA customs revenues would reduce the authority's budget resources to 700-750 million dollars this year, compared with its draft 2006 budget of 1.9 billion dollars.
"A fiscal outlook of this nature is incompatible with continuity in essential government operations," the report warned.
Both the United States and European Union have threatened to cut their funding if the radical Islamist movement Hamas does not commit itself to non-violence and recognise Israel's right to exist before it forms a new government following its January election victory.
Hamas has brushed off the threats, saying it will look to other Arab and Muslim countries to meet any shortfall in funding.
Israel's decision to freeze the customs duties, worth around 50 million dollars a month, has already led to a delay in payments to government employees.
