(Reuters) The Palestinian economy has become weaker and more dependent on foreign aid as the private sector has atrophied because of political violence and Israeli restrictions on the movement of goods and people, the World Bank said.
The report, which focuses on trends during the last two years, found conditions especially severe in the Gaza Strip, where unemployment rose to almost 35 per cent last year and more than a third of residents were living in severe poverty.
The bank said overall gross domestic product, a key gauge of economic health, had dropped by nearly a third since 1999, the year before the outbreak of the Palestinian uprising. Per capita GDP was $1,129 (about Dh4 ,146 ) last year, compared with $1,612 (about Dh5,920) in 1999, the bank said.
The report said foreign assistance to the Palestinians reached a record $1.4 billion (about Dh5.1 billion) in 2006, but that went mostly for day-to-day government costs, such as salaries, rather than development projects that can yield long-term economic benefit.
The number of Palestinian public employees grew to 168,000, a 60 per cent jump from seven years earlier. The bank predicted the Palestinian Authority would need $1.6 billion (about Dh5.8 billion) yearly to cover its mounting budget deficit.
"More troubling than the negative growth rate is the changing composition of the economy," the report said. Economic activity "is being increasingly driven by government and private consumption from remittances and donor aid, while investment has fallen to exceedingly low levels".