Israeli police accompany a group of Jewish visitors past the Dome of the Rock mosque at the al-Aqsa mosque compound in the Old City of Jerusalem on May 5, 2022. AFP
The report published ahead of a donor conference in Brussels paints a contrasting view of the Palestinian economy, which is seeing a post-lockdown recovery even as food insecurity worsens in places.
The economy in the West Bank, a Palestinian territory occupied by Israel since 1967, posted 7.8 percent growth in 2021 -- part of a rebound also fuelled by an increased number of Israeli work permits for Palestinians to find jobs in Israel.
In Gaza -- an Israeli-blockaded territory ruled by Islamist group Hamas -- the economy was slowed down by an 11-day war with Israel last year but still saw 3.4 percent growth.
The growth in the West Bank allowed the PA to increase tax revenue but the financial outlook remains "precarious", the World Bank said.
"The fiscal situation remains highly challenging," the organisation said, adding that the PA was now paying only "partial salaries since November".
The PA's 2021 budget deficit hit $1.26 billion, while a "record low" $317 million was received in foreign aid, the World Bank said.
Palestinian prime minister Mohammed Shtayyeh was set to meet EU officials in Brussels to push for "progress in the European position in terms of supporting the PA", the authority's spokesman Ibrahim Melhem told AFP.
Israel's regional cooperation minister Issawi Freij is also expected at the Brussels conference.
Israeli Prime Minister Naftali Bennett opposes Palestinian statehood but has said he wants to boost economic opportunities in the West Bank.
He has argued that Palestinians earning high Israeli wages along with other economic opportunities could help reduce violence in the long-running conflict, which has spiked again in recent weeks.