The World Bank said on Wednesday a Western aid embargo and Israeli restrictions could make 2006 the worst year in the Palestinian Authority's economic history. The international lending agency said the average Palestinian's personal income would fall by 40 percent, while the rate of poverty would rise to 67 percent of the population.
"We are now facing a severe economic crisis in Gaza and the West Bank - one that risks reversing the combined efforts of the past 13 years towards a sustainable economy," A. David Craig, the World Bank's director for the West Bank and Gaza Strip, wrote in the report. "If the current situation continues throughout 2006, this may be the worst year in the Palestinian economic history," he added.
The Palestinian Authority was formed in the occupied West Bank and Gaza Strip under 1993 interim peace talks with Israel. Hopes for full independence were dashed when negotiations stalled in 2000 and an armed Palestinian uprising erupted.
The World Bank estimated that growth per capita in the Palestinian territories would fall by 27 percent in 2006, while personal income would decline by 30 percent - a one-year contraction of economic activity equivalent to a deep depression. The bank said the unemployment rate would nearly double, from 23 percent in 2005 to 40 percent in 2006.
Barring a change in international aid policy, the World Bank said unemployment would rise to 47 percent and poverty to 74 percent by 2008. The poverty rate was 44 percent in 2005.
By 2008, the World Bank said, the cumulative decline in real growth since 1999 would reach 55 percent. Western donors slashed direct aid to the Palestinian Authority in March to pressure the Hamas-led government to recognise Israel, renounce violence and abide by interim peace deals. The embargo has prevented the government from paying salaries to 165,000 workers.
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