The Palestinian economy is sinking into dependence on foreign aid, the World Bank reported Tuesday. The new report details how the economies in the West Bank and Gaza Strip have deteriorated since 2000, when the Palestinian uprising erupted.
The latest crisis is in the Gaza Strip, where the takeover by the Hamas movement in June led Israel to almost completely close border crossings, threatening businesses that rely on imported raw materials and exported products. The Gaza Strip is now totally dependent on foreign aid, according to the United Nations.
The World Bank points to a dropping gross domestic product as evidence of the economic deterioration. After reaching $1,612 in 1999, the GDP per capita dropped to $1,129 in 2006. "More troubling than the negative growth rates over the past few years is the changing composition of the economy" - the shrinking private sector and expanding public sector, the report said, according to the AP.
"The GDP is being increasingly driven by government and private consumption from remittances and donor aid," the study found, noting that almost all of the aid is being used for daily expenses, such as salaries of civil servants, instead of long-term development.
The Palestinian economy took a further blow early last year when Hamas formed a government after sweeping an election.
The World Bank report warned that the closure of crossings in and out of Gaza could lead to laying off 30,000 private sector workers, worsening the already critical economic situation there.
The report said that economic development must proceed despite ongoing strife, though "parallel actions in a situation of conflict and political uncertainty are risky and politically costly." "Whether practical or not under the circumstances, the need for these parallel steps is evident," it concluded.