The Palestinian economy is fragile and the West Bank and Gaza are prone to 'high risk' of social unrest, an International Monetary Fund (IMF) report stated on Thursday.
The report, entitled 'Recent Experience and Prospects of the Economy of the West Bank and Gaza,' projected real GDP growth in WBG to drop to 5% in 2013 and anticipated that ensuing years will witness a continuous downward trend.
The IMF explained that this is the result of aid shortfalls, 'persistent' Israeli restrictions, political uncertainty, and Gaza's increasing isolation.
The 'dim' economic outlook is reflected by a high unemployment rate, with almost a quarter of the labour force out of work and youth unemployment as high as 28%.
The report points out that government revenue is outside the control of the Palestine Authority (PA), since it is dependent on donor aid and Israeli restrictions on imports and exports. The report also stresses the importance of structural reforms to the Palestinian economy.
The PA is facing a financing gap of $0.4 billion, which could widen if aid falls or if Israel demands repayment of clearance revenue advances from 2012, according to the report.
“...A sharp public sector retrenchment to cover the financing gap would further weaken the economy and raise already-high social tension,” the global lender warned.