Weak Palestinian economy facing difficult future due to pandemic

Palestine is trying to gradually recover its economic activity after overcoming the most critical phase of the pandemic: the impact of COVID-19 has been rather mild, but the effects of the restrictions that almost completely paralysed its weak economy are expected to be severe, especially in the occupied West Bank.

"As in the rest of the world, the local economy is facing disastrous consequences," Raja Khalidi, the director of the Palestinian Economic Policy Research Institute, tells Efe. But in the occupied territories, this is compounded by their fragile situation due to long-term occupation, no control over their borders or currency, and their economic and labour dependence on Israel.

Pending official data, the outlook is not optimistic: the Prime Minister, Mohamed Shtayeh, has predicted losses of 3.2 billion dollars, a fall of approximately 20% in the gross domestic product (GDP) by 2020 and an increase in the budget deficit to 1.4 billion dollars, which could further constrain an economy that depends heavily on aid from the international community.

According to Khalidi, the blow will be strongest in the West Bank, with "60% of the workforce" affected. However, he does not foresee major changes in Gaza, which has been less affected by the pandemic and already severely punished by the Israeli blockade imposed since 2007.

In the West Bank, the expert points out, the sectors most affected are the service sector, tourism - with its epicentre in the city of Bethlehem -, industry and commerce, the core of its labour network and its private sector, which employed many people in precarious jobs that were affected by unemployment which could last longer.

Many are returning to work after the progressive reopening of shops, businesses and industries, but Khalidi believes this is not the case for everyone, and unemployment, he warns, could reach 30% - around twice the pre-pandemic percentage.  

Added to this is the unemployment of tens of thousands of Palestinian workers in Israel and its colonies. Some of the 123,000 employees in these areas have lost their jobs or temporarily their income as border crossings and military checkpoints closely connected to the West Bank have been closed.

The Palestinian National Authority (PNA) has also maintained certain restrictions since it decreed confinement almost two months ago. Movement between provinces is still prohibited except for essential reasons, and travel between towns and cities is banned from 7:30 p.m., which was imposed in the middle of the holy month of Ramadan, which this year is being celebrated in an unprecedented situation: with mosques closed and without large crowds.

During the festive month, it's common for people to go out for a walk in the streets at night, with street vendors, open shops and restaurants full of diners and food overflowing, something that on this occasion is not happening, and which also means an economic loss for the traders.

Shtayeh also called for an extension of the state of emergency - approved since the beginning of March - throughout this month, so this still-restricted situation is expected to maintain the economy at half speed.

Against this backdrop, the Government took steps to contain the blow: a fund to provide economic assistance to the unemployed that will begin to be distributed after Ramadan, tax benefits and $300 million for small and medium-sized enterprises affected by the crisis, as well as the access of these enterprises to credit totalling $210 million to be managed by the Palestinian Monetary Authority.

It also called on business owners to reduce the rent to their tenants by 30% this year, and allowed loan payments to be postponed for up to four months, to ease pressure on mortgage holders.

"We have an emergency austerity budget," Shtayeh stressed last week, saying the government is using loans and revenues to keep the health system going and support the most impoverished and affected sectors at this time, a method that "goes hand in hand with reducing expenditures as much as possible" to set an already precarious economy straight.