Concerns over Palestinian growth prospects
According to the Palestinian Authorities, a resolution for recognition of statehood will be submitted to the General Assembly of the UN in September 2011. Apart from the burning issues such as the political instability and potential outbursts of conflicts that may result from it, one cannot help but wonder how the economic stability will be affected.
The Palestinian Finance Ministry reported that out of the $583.5 million that the Palestinian Authorities received in budget support in 2010, only 22% was from Arab states. The residual portion came from international donors, comprising the European Union and the United States. What is the likely reaction of such an economically relevant international community (the remaining 78 %) to the potential new statehood of Palestine? Even if we presume that the "new country" will be provided with international support, it does take time for the international community, especially the EU and USA to recognize ANY newly formed State in the world. The UN estimated in 2008 that Palestine's GDP stood at $6.159 billion, growing at a 2% annual rate, with a GDP per capita of $1,485 making its 4 million inhabitants amongst the poorest in the world. The Palestinian's ailing economy at this point depends heavily on foreign aid, and it may suffer a grave deprivation of resources from the international economic community which is yet to make its decision regarding the recognition of the new state.
However unlikely it may seem, last April the International Monetary Fund recognized the PA as an authority fully competent of running the economy of a future well-functioning independent Palestinian state. The World Bank made a similar point, stating in their report: "If the Palestinian Authority maintains its performance in institution-building and delivery of public services, it is well positioned for the establishment of a state at any point in the near future." Still, with Palestine being overly dependent on both foreign aid- particularly through the UNRWA (United Nations Relief and Works Agency) and non-governmental organizations, both the IMF and the WB expressed their concerns about Palestine not being able to maintain the current growth rate without the lessening of Israeli restraints in the West Bank and Gaza. For example, as a result of the Israeli blockade 85% of factories were shut down or operating at less than 20% capacity.
Nevertheless, if a state does get established, or if the state's economy opens up by some other means, such as possible greater financial support from the Arab world, then a period of notable economic growth could arise. (Source: www.yallafinance.com)