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The Palestinian Territories has a relatively small economy which is characterized by large labor flow into Israel , high unemployment (around 30% by most estimates), and substantial dependence on Israel for foreign trade. The small economy size is compounded by the low level of income compared to more advanced economies. The figures appearing in table 2 are averages for the WB and the GS but they are some-what misleading due to the differences in the standards of living between the WB and the GS (which is much lower) and with-in the different WB districts.
The current political chaos started in September of 2000 and the figures in table 2 reflect the severe economic consequences over the past few years. Over the last three years, the GNP and GDP have lost around 40% and 36% of their 2000 values respectively. The GDP per Capita has also lost around 40% of its value over the same period. Inflation has been fairly stable since 1998.Unemployment has doubled over those same years. The unemployment figures are somewhat misleading if one considers the high rate of disguised unemployment. The public sector is over staffed with many unqualified people. The trade and service sectors are “loaded” with people working in jobs and fields that are not “theirs”. This phenomenon has the tendency to lower the unemployment figures statistically, but it creates a severe problem of labor under-productivity. Retraining is badly needed in many sectors of the Palestinian economies.
The Palestinian economy is mostly services oriented and it lacks natural resources except for raw materials in the construction, stone, and marble industry. Natural gas was discovered off the GS shore by British Petroleum but its economic benefits have not materialized yet.
Table 2
Economic Indicators in the PalestinianTerritories 1998 - 2002
Economic Indicators |
1998 |
1999 |
2000 |
2001* |
2002* |
Gross National Income- GNI (millions of US$) |
5,435 |
5,166 |
5,419 |
4,501 |
3,273 |
Gross Domestic Product- GDP (millions of US$) |
4,534 |
4,289 |
4,607 |
4,012 |
2,951 |
GNI per capita (US$) |
1,876 |
1,806 |
1,797 |
1,380 |
1,016 |
GDP per capita (US$) |
1,565 |
1,496 |
1,535 |
1,236 |
921 |
Inflation Rate (%) |
5.5% |
5.5% |
2.8% |
1.2% |
5.7% |
Unemployment Rate (%) |
14.4% |
11.8% |
14.1% |
25.5% |
31.3% |
Exports (millions of US$) |
877 |
1,006 |
770 |
728 |
785 |
Imports (millions of US$) |
3,257 |
3,509 |
3,164 |
2,506 |
2,413 |
Int’l Trade Balance (millions of US$) |
- 2,380 |
- 2,503 |
- 2,394 |
- 1,778 |
- 1,628 |
Donor Assistance (millions of US$) |
330.1 |
464.7 |
478.84 |
NA |
NA |
Source:- PCBS (www.pcbs.org), and World Bank estimates.
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It is somewhat surprising that in-spite of the difficult political and economic environment over the past few years, the Palestinian private sector has not only survived (in general) but it may have become more efficient. The telecom sector has been privatized. Utilities and transportation are private. Higher education is mainly public. The current trend is to privatize the few remaining public sector companies. There is a growing recognition among Palestinians that the Palestinian economy must rely on trade and not aid for its development. Small-scale business enterprises constitute the vast majority of economic establishments (74,562 or 96.9%).
The figures in table 3 show that the construction sector has benefited from the establishment of a joint World-Bank and Palestinian National Authority (PNA) mortgage company a few years ago.
Table 3
Sub-Sector Contribution to GDP in the PalestinianTerritories in 2001
Economic Activity |
Percentage of DP |
Construction |
22.0% |
Mining, Manufacturing, Electricity & Water |
18.0% |
Public Administration & Defense |
14.0% |
Wholesale & Retail Trade |
13.0% |
Agriculture & Fishing |
10.0% |
Transportation |
5.0% |
Financial Intermediation |
4.0% |
Publicly-Owned Enterprises |
4.0% |
Other Services |
10.0% |
Source: PCBS; World Bank and other estimates
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