Excertps from an article by Steven Erlanger of the New York Times:
JERUSALEM, March 15 — If Israel withholds revenues from a Hamas-led Palestinian Authority and donor countries reduce aid, the Palestinian areas will be thrown into a deep depression, with personal incomes dropping 30 percent this year alone, according to a new World Bank study.
The study says the Palestinian economy would shrink by 27 percent in 2006 — a one-year contraction that compares to the Depression in the United States. Unemployment would nearly double, to 39.6 percent, and two-thirds of the population would be living below the poverty level.
The World Bank study looked at four hypotheses.
Israel's policy — withholding $55 million a month in taxes that it collects for the Palestinian Authority and restricting trade and access to Israel by Palestinian workers — is the largest factor.
The next largest is the expected cut in budget support to a Hamas-run Palestinian Authority. The main cash donors are Saudi Arabia and the European Union, and while the bank assumes that Muslim donations will continue unchanged, Western support is expected to drop at least $50 million this year.
The first hypothesis assumes that nothing much will change; the second that Israel alone holds back revenues and further reduces border trade and access; the third that only foreign aid is reduced; and the fourth, which the report considers most realistic, that Israel continues its restrictions and that foreign aid is also reduced.
The consequences of this last assumption are dire even this year. Real gross domestic product per capita would fall 49.4 percent from 1999, before the second intifada began, when the Palestinian Authority ran a small budget surplus.
In 2007 unemployment would rise to 44.3 percent and the poverty level to 72 percent, the bank estimates, with another 4-point drop in the size of the economy, compared with 1999.
Israeli restrictions on trade and movement, including the construction of part of the separation barrier, have already cost the Palestinian economy an estimated 5 percent a year in real economic growth.
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