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publication October 11, 2017

Palestine's Economic Outlook - October 2017

Following a period of recovery after the 2014 Gaza war, growth in the Palestinian territories dropped to 0.7 percent in Q1 2017 as reconstruction efforts decelerated and private consumption slowed down. At 29 percent, unemployment continues to be stubbornly high. Given the ongoing constraints to economic competitiveness, medium term growth is projected at 3 percent. Lower than expected aid and the possibility of further conflict pose down-side risks to growth and employment.

Recent Developments

The latest war in Gaza had severe social and economic consequences and caused the Palestinian economy to slip into recession in 2014. Reconstruction efforts allowed growth to recover to an annual average of 3.4 percent in 2015-16. However, aid receipts for reconstruction have significantly slowed in 2017 leading to a sharp deceleration in reconstruction activities. This, along with a slowdown in private consumption in the West Bank due to political tensions pushed real GDP growth down to a mere 0.7 percent in the first quarter of the year.

At 29 percent, the unemployment rate in the Palestinian territories remains stubbornly high. Unemployment in Gaza, at 44 percent, is more than twice as high as that in the West Bank; more than 60 percent of those aged between 15 and 29 in Gaza are out of work.