Report says Palestinian economy declining

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RAMALLAH, West Bank, March 12 (UPI) -- A World Bank report on the Palestinian economy says Israeli-imposed economic restrictions and lack of donor aid constrain economic growth in Palestinian areas.

The report, called "Fiscal Challenge and Long Term Economic Costs," was released Tuesday ahead of the Ad-Hoc Liaison Committee meeting of donor countries to the Palestinian Authority scheduled to convene in Brussels this month.

"The slowdown in growth in the West Bank during the first three quarters of 2012 reflects the absence of further easing of Israeli restriction, the withdrawal of fiscal stimulus due to persistent shortfall in donor aid, and the uncertainty created by the P.A.'s fiscal stress. In addition, the global economic slowdown, particularly in Israel, contributed to the declining trend in the West Bank," the report states.

As long as a political process between Israel and the Palestinian Authority remains absent, the situation for an economically viable Palestinian state is unlikely to change, the report warns.

The Palestinian economy is in danger of losing its capacity to compete in a global market, the report said, adding the structure of economy has deteriorated since the late 1990s because the value-added of the trade sectors has declined. The share of exports in the Palestinian economy has been in steady decline since 1994, dropping 7 percent in 2011, to one of the lowest in the world, the report states.

"Continued financial support by the donor community, and increased reform efforts by the Palestinian Authority to manage the current fiscal challenges must remain a high priority," Mariam Sherman, director of the World Bank in the West Bank and Gaza, was quoted as saying.