Palestine Economic Situation Part I

The Portland Trust, Germany Trade Invest (GTAI), Ghorfa – Arab-German Chamber of Commerce and Industry eV, the International Monetary Fund (IMF) and the Palestinian Central Bureau of Statistics (PCBS) provide current basic data on Palestinian economic development .

During the years of the complete Israeli occupation, the Palestinian economy was purely a subcontractor for Israel; there was no independent economic development. Even after the creation of the Palestinian Authority (PA), economic development remained dependent on Israel. To date, all exports and imports are subject to the approval and approval of the Israeli authorities.

The Palestinian economy, which is suffering from various restrictions, sees itself as a result of the corona pandemic and the measures adopted by the Palestinian leadership since the beginning of March 2020 to prevent the spread of the coronavirus (the state of emergency was declared on March 5, 2020, and for the West Bank on March 22, 2020 imposed a 14-day curfew) facing other extreme economic challenges. Income decreased and expenditure on the medical, social and economic needs of the population increased. Losses of 2.5 billion US dollars and a decrease in gross domestic product of 14% in 2020 compared to the previous year were forecast in April 2020 with a 3-month duration of the crisis.

According to LOVERISTS, the corona situation has particularly negative effects in the areas of tourism, transport and the hotel and catering industry. The Palestinian Central Bureau of Statistics (PCBS) estimates losses in the tourism sector to be $ 1.15 billion by the end of 2020. More than 10,000 people employed in this sector have lost their jobs. The administrative districts of Bethlehem and Jerusalem are particularly affected. In the construction sector, the number of building permits issued decreased by 45% in the 2nd quarter of 2020 compared to the previous quarter and by 46% compared to the 2nd quarter of 2019.

A household survey by the Palestinian Central Bureau of Statistics (PCBS) to measure the impact of the COVID-19 pandemic on the socioeconomic conditions of Palestinian households between March 5 and May 25, 2020, found that 14% of main income earners went out of work during the lockdown; % were unemployed before the pandemic. The remainder continued to work, but 54% were absent from work during the lockdown but were still officially employed. The majority of those who did not work during this period came from the industrial sector (51%). As a result of the stoppage of work during the lockdown, only 23% of main earners who worked as wage earners continued to receive their normal wages, 25% received a lower wage and 52% received no wages at all (95% of them in the private sector). The impact was more severe in the West Bank, with 61% of wage earners not receiving any income, compared to 31% in Gaza, where the spread of COVID-19 – and thus containment measures – was much more limited during that period. Due to the decline in work and wages, 42% of households experienced a decrease in income of half or more during the lockdown compared to February / March (46% in the West Bank and 38% in the Gaza Strip). The survey also found that 58% of Palestinian households typically borrow or buy on credit to meet household consumption, including food and other basic expenses. That percentage rose to 63% during the lockdown (79% in Gaza and 52% in the West Bank),

The economic situation is made even more difficult by the PA’s renewed refusal to accept the taxes and duties that Israel collects and passes on to them under the Paris Treaties – after withholding a 3% processing fee and deducting the costs of provision of electricity and water and other services – because of the announcement by the Israeli government that it intends to annex parts of the West Bank. The PA will not accept any money until Israel finally renounces the annexation plans. Taxes and duties are approximately $ 180 million per month and represent approximately 60% of the Palestinian Authority’s budget. The PA is now only paying the approximately 180,000 civil servants since July 202050% of her salary after she did not pay a salary in June 2020, but at least 1,750 shekels (about 518 USD or about 438 €) because she lacks the necessary liquidity to pay the salaries in full.

On November 1, 2020, the European Union supported the Palestinian Authority with 10 million euros so that it can pay the September salaries and pensions of its employees, primarily in the health and education sector in the West Bank. The total contribution of the EU to the current expenditure of the budget of the Palestinian Authority in 2020 is around EUR 90 million.

As early as 2019, the Palestinian Authority had refused to accept the taxes and duties for eight months (from February to October 2019), as Israel had started to deduct the amount that the PA families from political prisoners and through on the basis of a law passed in July 2018 pays the conflict for the dead (an amount of around 11 million euros per month). This has made the PA’s fiscal situation considerably more difficult.

Overall, the refusal to accept taxes and duties and lower economic output have reduced public revenues by around 80%. The current account deficit rose by 65.8% in the first half of 2020 before financing compared to the previous year. Public net income decreased by 16.7% in the first half of 2020 compared to the same period of the previous year. The slowdown in imports reduced customs revenue by 18.9% in the first half of 2020.

In addition, donor support, which has been declining for years, is causing problems for the Palestinian Authority. According to the Portland Trust, donor budget support fell 18.2% in the first half of 2020 compared to the same period last year. In 2008, budget support from donors still made up 32% of gross domestic product; in 2019 it was only 3.5%. In early 2019, the American government stopped all financial aid to the PA. Already in 2018 the funds had been severely cut and the financial support for the UN relief agency for Palestine refugees UNRWA was discontinued (the USA previously paid around 300 million US dollars per year to the Palestinian Authority and civil organizations and was the largest donor of UNRWA).

Palestine Economic Situation 1