The Palestinian economy remains crippled seven years after the outbreak of the intifada and needs 1.62 billion dollars in annual foreign aid to close the deficit, the World Bank said in a report obtained by AFP on Tuesday.
"Per capita GDP (gross domestic product) in the Palestinian territories now stands at 1,129 dollars (814 euros), about a third less than its level in 1999," according to the report to be presented to an international donor organisation at a meeting later this month in New York.
"GDP is being increasingly driven by government and private consumption from remittances and donor aid, while investment has fallen to exceedingly low levels, leaving little productive base for a self-sustaining economy."
As the Palestinian private sector has withered due to Israeli measures in the wake of the intifada and the rise to power of Hamas, including restrictions on movement, thousands are flocking to the beleaguered public sector.
"With few options at its disposal, and despite an unsustainable wage bill, the PA (Palestinian Authority) has resorted to absorbing workers as a way to alleviate poverty," the report said. "As a result, public sector employment has grown by 60 percent since 1999 and by 2006 stood at about 157,800.
"Thus, while the public sector has expanded, the economy's productive capability has begun to hollow out making it increasingly donor dependent." The PA is currently facing a severe fiscal shortfall - in the first half of 2007, the PA's deficit was 100 million dollars (72 million euros) a month.
External aid has been unusually high in 2007, with the PA receiving nearly 450 million dollars (324 million euros) in the first half of the year. "The PA forecasts a need for at least 1.62 billion dollars (1.17 billion euros) in donor assistance per year to close the fiscal gap, of which 91 percent will go to meet recurrent expenditure needs as opposed to development aid," the report said.
The hard times have had an increasingly negative impact on daily life, with chronic diseases surging 31 percent since 2005 and the number of households with safe drinking water declining by eight percent between 2000 and 2007.
The Palestinian economy has been reeling ever since the West imposed a freeze on direct aid to the government after Hamas - considered a terror outfit by the European Union and the United States - formed its first cabinet in March 2006.