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Twenty-Seven Months -- Intifada, Closures Color profile: Generic CMYK printer profile Composite Default screen World Bank Public Disclosure AuthorizedPublic Disclosure Authorized Twenty-Seven Months - Intifada, Closures and Twenty-Seven Months - Intifada, Closures and Palestinian Economic Crisis Public Disclosure AuthorizedPublic Disclosure Authorized An Assessment Palestinian Economic Crisis Public Disclosure AuthorizedPublic Disclosure Authorized An Assessment Public Disclosure AuthorizedPublic Disclosure Authorized May 2003 World Bank, May 2003 Cover-final.prn J:\World Bank\27months\Cover\Cover-final.cdr 20 June, 2003 02:06:51 PM Twenty-Seven Months - Intifada, Closures and Palestinian Economic Crisis An Assessment The World Bank May 2003 All rights reserved ©2003 The World Bank West Bank and Gaza Office P.O.Box 54842, Jerusalem ii Contents PREFACE.................................................................................................................................. VII ABBREVIATIONS AND ACRONYMS...................................................................................IX SUMMARY .................................................................................................................................XI THE PALESTINIAN ECONOMY IN 2002.........................................................................................XI Dramatic Decline, Signs of Stabilization............................................................................... xi Averting Economic Collapse................................................................................................xiii IMPACT ON ORDINARY PALESTINIANS ..................................................................................... XIV WHAT CAN BE DONE?............................................................................................................. XIV Recommendation to the Palestinian Authority.......................................................................xv Recommendations to the Donors ......................................................................................... xvi Recommendations to the Government of Israel .................................................................. xvii LOOKING AHEAD ................................................................................................................... XVIII 1. CLOSURE AND CURFEW................................................................................................. 1 INTERNAL CLOSURE..................................................................................................................... 1 EXTERNAL CLOSURE.................................................................................................................... 2 2. ECONOMIC AND SOCIAL IMPACT............................................................................... 7 ECONOMIC IMPACT ...................................................................................................................... 7 Employment........................................................................................................................... 11 Trade..................................................................................................................................... 15 Investment and Productive Capacity .................................................................................... 17 Fiscal Accounts..................................................................................................................... 20 Output ................................................................................................................................... 24 The Private Sector................................................................................................................. 26 SOCIAL IMPACT.......................................................................................................................... 30 Impact at the Household Level.............................................................................................. 30 Adaptive Strategies ............................................................................................................... 34 3. THE INSTITUTIONAL RESPONSE............................................................................... 39 THE RESPONSE OF THE PALESTINIAN AUTHORITY ..................................................................... 39 Crisis Management and Overall Coordination .................................................................... 39 The Reform of the Palestinian Authority............................................................................... 39 Health Service Delivery ........................................................................................................ 42 Education Service Delivery................................................................................................... 43 Social Assistance Delivery.................................................................................................... 46 THE RESPONSE OF THE MUNICIPALITIES .................................................................................... 46 THE RESPONSE OF UNRWA ...................................................................................................... 48 THE RESPONSE OF THE NGOS.................................................................................................... 50 THE RESPONSE OF THE DONORS................................................................................................. 51 The Quantity and Composition of Donor Assistance............................................................ 51 Emergency Assistance in 2002.............................................................................................. 53 iii Donor Coordination..............................................................................................................55 IMPEDIMENTS TO DONOR ACTIVITY, ISRAELI FACILITATION ..................................................... 56 4. GOING FORWARD........................................................................................................... 61 THE ECONOMIC OUTLOOK FOR 2003-4...................................................................................... 61 SOME ASSUMPTIONS UNDERLYING RECOVERY AND GROWTH................................................... 64 DONOR FINANCING IN 2003 ....................................................................................................... 66 RECOMMENDED DONOR ACTIONS ............................................................................................. 67 Emergency Support...............................................................................................................67 Medium-Term Development Assistance in 2003................................................................... 74 Priorities in Aid Management and Coordination ................................................................. 75 RECOMMENDED PA ACTIONS .................................................................................................... 78 Managing the Crisis.............................................................................................................. 78 Deepening the Reform Process............................................................................................. 80 RECOMMENDED GOVERNMENT OF ISRAEL ACTIONS.................................................................. 82 ANNEX 1: A COMPARISON OF WELFARE INSTRUMENTS ........................................ 85 FIGURES 1. The West Bank under Curfew, June 17 - December 31, 2002............................................... 2 2. Real GNI and GDP per Capita, 1994-2002............................................................................ 8 3. Per Capita Real GDP Index, Israel....................................................................................... 11 4. Palestinian Employment in Israel, 2000-2002 ..................................................................... 13 5. Employment in the West Bank and Gaza, 2000-2002 ......................................................... 14 6. Real Wage Adjustment, 1996-2002..................................................................................... 14 7. Trade with Israel.................................................................................................................. 16 8. Revenues of the Palestinian Authority, 1999-2002 ............................................................. 20 9. Resident Private Sector Deposits ......................................................................................... 30 TABLES 1. Closure Systems Compared ................................................................................................... 4 2. Employment and Unemployment ........................................................................................ 15 3. Physical Damage by Governorate and Sector from September 28, 2000 and August 30, 2002 ........................................................................... 18 4. Physical Damage between September 28, 2002 and August 20, 2002 ................................ 19 5. Investment, Depreciation, Destruction & the Capital Stock, 1998-2002............................. 20 6. PA Fiscal Accounts -- Monthly Averages ........................................................................... 22 7. Summary of West Bank and Gaza Estimated Macro Economic Trends and Projections ...................................................................................... 25
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