2020-04-17

 World Bank: The Palestinian economy is expected to contract by 2.5 - 7%

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•    Following growth of less than 1% in 2019, the Coronavirus (COVID-19) pandemic is expected to weigh heavily on the #Palestinian economy leading to a contraction of 2.5% in 2020 - at a best-case scenario. 

•    1/4 of the Palestinian workforce was unemployed and 24% of #Palestinians lived below the poverty line of US$ 5.5 a day, prior to the pandemic. The spread of the Coronavirus (COVID-19) has worsened the situation. 

•    The Palestinian Authority estimates US$120 million to respond to the medical needs alone. With donor funding at its lowest in decades, the #Palestinian financing gap in 2020 could exceed US$1billion.
•    2020.

•    In the absence of policy tools available for the Palestinian Authority and if the #coronavirus outbreak is not controlled within 4 months, the economic contraction may exceed 7 percent.


Following a fiscal crisis in 2019, the Palestinian economy was projected to slowly recover in 2020. However, the Covid-19 outbreak seems to be largely weighing on economic activity. Living conditions are difficult with a quarter of the labor force unemployed and 24 percent of Palestinians living below the US$5.5 2011 PPP a day – even prior to the recent outbreak. A larger than expected decline in aid and a further spread of the Covid-19 virus pose significant downside risks.

Growth in 2019 is estimated to have been weak, reaching 0.9 percent, as economic activity was disrupted for most of the year due to the fiscal crisis. Notably, this outturn is a result of Gaza registering minimal positive growth following a steep recession in 2018 (-3.5 percent), while growth in the West Bank in 2019 is expected to reach the lowest level over the last five years (1.1 percent), down from 2.3 percent in 2018. Going forward, measures put in place by the PA since early March 2020 to halt the spread of the covid-19 outbreak, while effective in limiting the spread of the virus, seem to have resulted in disruptions in economic activity, especially in the West Bank. As a result, the economy is expected to contract by 2.5 percent in 2020.

There are significant risks to the outlook. If the covid-19 outbreak is not controlled soon, its impact on economic activity and livelihoods is going to be severe. Under this scenario, drastic measures are expected to be put in place including a complete lock down on the West Bank and Gaza and a ban on movement between cities. Private sector representatives have also announced plans to cut pay by fifty percent. The largest impact would be through a decision to stop the entrance of more than 140,000 Palestinian workers to Israel, as those workers and their families account for a third of private consumption given their higher take-home pay. A sharp reduction in the number of tourists is also expected to contribute negatively. The lack of policy tools, such as fiscal stimulus, liquidity injections, or external borrowing could leave the economy vulnerable. The impact on consumption could be severe and the economy could contract by more than 7 percent.

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