The lack of a clear political horizon towards peace and reconciliation creates an unsustainable economic situation.  Even though donor aid had increased government-funded services and fueled consumption-driven growth during 2007 to 2012, this growth model has proved unsustainable. Donor support has significantly declined in recent years and, naturally, aid cannot sustainably make up for inadequate private investment, constrained by weak investor confidence due to the ongoing restrictions and the lack of political progress. Recovering slowly from the recession of 2014, the growth rate is projected to hover around 3.5 % in the medium term.

The 2014 war in Gaza created a humanitarian crisis and impacted the economy which continues to suffer to this day. More than 2,100 Palestinians died during the hostilities and a third of the population got internally displaced. Economic losses amounted to US$1.7 billion. At the current pace of recovery, Gaza’s economy is not expected to rebound to its pre-war level until 2018.

In 2016, unemployment rates reached 27% despite the Government of Israel’s efforts to increase the number of work permits for Palestinians. Unemployment rates are higher in Gaza, at 42%, and youth unemployment is at 58%. Although nearly 80% of Gaza’s residents receive some form of aid, poverty is very high.

The current decline could be reversed in an environment where sustainable, private sector-led growth is fostered coupled with a commitment of ongoing financial support from the international community.   A dynamic private sector can generate the sustainable growth needed, however, restrictions put in place by the Government of Israel continue to stand in the way of potential private investment. Access to Gaza remains highly controlled, and much of Area C, which makes up 60% of the West Bank, is inaccessible to Palestinians.

Last Updated: Oct 01, 2016

Since 1993, the World Bank established the Trust Fund for Gaza and the West Bank as a mechanism for funding assistance. The Bank’s program in the Palestinian territories focuses on laying the foundation for a future Palestinian state. Knowledge products and grants cover various sectors including municipal services, energy, water and solid waste management, as well as social protection, health and education.  Along with offering a range of advisory services, the International Finance Corporation (IFC) continues to support both existing and new clients in the Palestinian private sector. The Multi-Lateral Guarantee Agency (MIGA) has underwritten a number of projects in the power, agribusiness, and manufacturing sectors.

Last Updated: Oct 01, 2016

•    The poor and vulnerable have accessed social and economic services and 75% of municipalities have applied social accountability measures. The PA has developed protocols for medical referrals abroad and increased its control over net lending as electricity distribution companies’ performance indicators are being tracked.  To increasing employment opportunities, jobs have been created in marginalized and rural communities along Abraham Path.
•    The World Bank has maintained a robust analytical program that has assisted the PA’s monitoring of the impact of restrictions on economic activity and promoting private sector-led growth. The Bank is helping the PA develop its visions for trade, electricity, and generating jobs. A World Bank study, published in October 2013, showed that access to Area C for Palestinian businesses could increase GDP by a third.
•    Half of the active grants’ portfolio directly strengthens institutions in education, health, social protection, municipalities and utilities. The program actively promotes regional cooperation in water and energy. The Bank has helped analyze the infrastructure needs in Gaza and supported the rehabilitation of dilapidated infrastructure there.
•    The Bank functions as the secretariat for the Ad Hoc Liaison Committee of donors to the Palestinian Authority. The Bank submits a report prior to each meeting updating partners on recent economic and fiscal trends, and provides economic and institutional analysis.

Last Updated: Oct 01, 2016

By administering a multi-donor Trust Fund (Australia, Canada, Finland, France, Japan, Kuwait, Norway, Poland, and the United Kingdom have contributed to this) the Bank has channeled funds (approximately US$1.4 billion since its inception) to support the Palestinian Authority’s budget.

Coordination with a number of donors on investment projects has allowed the World Bank to leverage funding (four times the amount of Bank resources) and maximize impact on the ground.  The Partnership for Infrastructure Multi-Donor Trust Fund (PID MDTF), established in 2012 to support infrastructure projects focusing on water, energy, and urban development, has grown to eight donors (Denmark, France, Finland, Norway, Sweden, the Netherlands, Portugal, Croatia) and over US$107 million in funding. The PID MDTF was the main vehicle to channel donor funding to emergency Gaza reconstruction in water, energy and municipal sectors.

Last Updated: Oct 01, 2016


West Bank and Gaza: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments