Palestinians are getting poorer onaverage for the third year in a row. As evidenced inprevious World Bank reports, the competitiveness of thePalestinian economy has been progressively eroding since thesigning of the Oslo accords, in particular its industry andagriculture. Even though donor aid had increasedgovernment-funded services and fueled consumption-drivengrowth during 2007 to 2011, this growth model has provedunsustainable. Donor support has significantly declined inrecent years and, in any case, aid cannot sustainably makeup for inadequate private investment. Thus, growth hasstarted to slow since 2012 and the Palestinian economycontracted in 2014 following the Gaza war. In early 2015,GDP was still lower than it was a year ago. Due topopulation growth, real GDP per capita has been shrinkingsince 2013. Unemployment remains high, particularly amongstGaza’s youth where it exceeds 60 percent, and 25 percent ofPalestinians currently live in poverty. Against the backdropof weak economic growth, reduced donor aid, and temporarysuspension of revenue payments by the Government of Israel(GoI), the Palestinian Authority’s reform efforts have notbeen able to prevent another year with a financing gap. Thepersistence of this situation could potentially lead topolitical and social unrest. In short, the status quo is notsustainable and downside risks of further conflict andsocial unrest are high.
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