The Palestinian economy’s performance exceeded expectations in 1999. Initial estimates for 1999 real GDP and GNP growth – 4.5 and 4.6 percent respectively – were revised to 6 and 7 percent. Most macroeconomic indicators showed improvements: Labour flows to Israel expanded by 15 percent; registered Israeli-Palestinian trade rose 9 percent; planned construction grew 14 percent; and donor assistance increased 12 percent. Nevertheless, two vital 1999 indicators revealed more disturbing results: the value of approved investment projects dropped in both the West Bank and Gaza; and the value of registered Palestinian exports to Israel fell in real terms.
A detailed report, drafted by the Palestinian Authority with the help of the International Monetary Fund, was submitted to a donor conference in Lisbon, Portugal in June 2000. According to this report, good governance, clean financial management and disclosure have improved within the Palestinian Finance Ministry. Since late April 2000, increased income has streamed into the public PA treasury, and this financial injection should assist the Finance Ministry to curb an accumulated budget that has reached roughly $150 million. Several sources of PA income have recently been relocated to their appropriate public coffers, a commitment Arafat pledged to donor states at a conference held last year in Tokyo. Within this framework, in early January, Arafat signed a presidential decree mandating basic reform in Palestinian financial management and the gradual elimination of economic monopolies that the PA itself had established in the past.