World Bank report titled "Racing Against Time," projects that the Palestinian economy will continue to operate significantly below its potential, with growth hovering around 3%.
This gloomy forecast will negatively impact living standards as income per capita stagnates due to population growth trends, said the World Bank in a press release on September 18.
The report will be presented to the Ad Hoc Liaison Committee (AHLC) on September 20. It highlights the economic challenges of the Palestinian territories and underscores the constraints affecting healthcare services.
"Over the last five years, the Palestinian economy has been stagnating, and is not expected to improve unless policies on the ground change,” said Stefan Emblad, the World Bank Country Director for West Bank and Gaza. He emphasized the widening gap between the Palestinian territories and Israel, with Israeli income per capita being almost 14-15 times higher. Additionally, poverty rates in the Palestinian territories remain stubbornly high, with approximately one in four Palestinians living below the poverty line.
The Palestinian economy faces a myriad of challenges, including Israeli restrictions on movement and trade in the West Bank, a near-blockade of Gaza, an internal divide between the West Bank and Gaza, fiscal constraints, and an ongoing reform program of the Palestinian Authority (PA), coupled with declining foreign assistance.
Public revenues have increased this year, but expenditures have also risen, primarily driven by a growing public wage bill. The deficit for 2023 is projected to reach US$493 million, or 2.5 percent of GDP, considering only partial implementation of recent labor agreements and Israeli deductions from revenues collected on behalf of the PA. The deficit would further increase to 2.7 percent of GDP if labor agreements were fully implemented.
The main concern is the limited financing options available, leading to the accumulation of arrears with private suppliers, the public pension fund, and public employees, who have received only 80-85 percent of their wages since late 2021. This accumulation of arrears could disrupt economic activity and have adverse effects on poverty levels and social stability in the long run.
Financial support from donors and cooperation from the Government of Israel are vital. This cooperation includes transferring revenues collected from Israeli businesses in Area C to the PA, transferring all VAT on the Israel-Gaza trade to the PA, implementing the e-VAT clearance system, and providing greater transparency regarding clearance revenue deductions.
The fiscal constraints also impact the Palestinian healthcare system, particularly in addressing non-communicable diseases. Barriers to healthcare access, including restrictions on the movement of Palestinian patients and a bureaucratic permit process, hinder outside medical referrals for treatment in non-Palestinian hospitals.
Significant physical and administrative constraints limit timely access to outside medical referrals for treating critical conditions such as cancers, heart diseases, and maternal and child health issues. The Israeli occupation, territorial fragmentation, and macro-fiscal challenges have severely affected the ability of the Palestinian healthcare system to provide these services in public hospitals. The situation is particularly dire in Gaza, where patients struggle to obtain timely medical exit permits.
The outside medical referral process involves a complex system of patient and financial flows, with approximately 42,000 permit applications filed annually. Permit approvals vary, highlighting arbitrariness in the evaluation process. Research indicates that the near-blockade of Gaza has increased mortality rates, as some patients do not survive the lengthy permit process.
Outside medical referrals represent a significant expenditure for the Palestinian Ministry of Health (MoH), further straining the fiscal position. The report emphasizes the need for improved coordination between Israeli and Palestinian authorities to streamline the permit process, enhance timely access to care, facilitate the entry of medical equipment, and ensure price transparency.
The World Bank report underscores the urgent need for policy changes and international cooperation to address economic challenges and healthcare access constraints faced by the people of Palestine.
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