West Bank sees economic growth in 2009, but hurdles remain to lasting improvement

16 January 2010 [MediaGlobal]: The West Bank of the Occupied Territories in Palestine saw its Gross Domestic Product grow by 7 percent in 2009 after years of economic downturn, according to figures compiled by the International Monetary Fund. Since 2000, when the government of Israel severely restricted movement in the Occupied Territories, the West Bank’s GDP declined by an estimated 30 percent per capita. So while the growth this year shows the beginning of an economic upswing, the Palestinian economy continues to function below its potential, according to the IMF’s Resident Representative in West Bank and Gaza, Oussama Kanaan. Kanaan attributes the growth to three factors: improved fiscal policy of the Palestinian Authority (PA), improved security, and the Israeli government’s relaxation of restrictions on access and movement. The PA has improved fiscal management by implementing measures to oversee spending and increase accountability. This has improved their capacity for effectively managing aid money. But for growth to continue, Kanaan explained to MediaGlobal, “the restrictions on access to Israel have to be lifted and the private sector should be able to use all the land available to it.” The land in the West Bank is divided into three zones, A, B, and C. Area C makes up approximately two-thirds of the West Bank and is controlled by Israel, which imposes extensive restrictions on Palestinian use of this land. Israel’s control of Area C dates to the 1995 Oslo accords when these areas were identified as strategically important to Israel. While governance of Areas A and B was transferred to the PA, security for Area C remained the responsibility of Israel. Kanaan emphasized the importance of Area C for continued economic growth: “The Israelis have to actually relax and lift restrictions on the use of this land by the Palestinian private sector, both agricultural and industrial. That has to happen if the rate of growth per capita is to continue.” The economic growth this year demonstrates a hopeful turn around, but the change is minor compared to the economic struggles since 2000. Unemployment in the West bank was at 18 percent for the first half of 2009. This is a slight improvement from 2008, but Kanaan emphasized, “For there to be a reduction in unemployment the growth needs to be sustained for much longer.” For Palestinians in the West Bank to feel the effects of growth, the PA, the government of Israel, and international donors will need to continue implementing positive fiscal policies while ensuring security and freedom of access and movement. Allyn Gaestel