Gaza econ­omy ‘on verge of col­lapse,’ with world’s high­est un­em­ploy­ment

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The econ­omy of Gaza – as­sailed by war, poor gov­er­nance and a joint Is­raeli-Egyptian block­ade – has reached the “verge of col­lapse” with the coastal strip suf­fer­ing the high­est rate of un­em­ploy­ment in the world.

The bleak pic­ture is pre­sented in a dev­as­tat­ing re­port by the World Bank, re­leased on Fri­day, which said that Gaza’s econ­omy had been stran­gled by years of block­ades, war and poor gov­er­nance and faced a danger­ous cri­sis over its abil­ity to meet wages and other spend­ing re­quire­ments.

Call­ing for the “lift­ing of the block­ade on the move­ment of goods and peo­ple to al­low Gaza’s trad­able sec­tors to re­cover”, the re­port says that about 43% of Gaza’s

1.8 mil­lion res­i­dents are un­em­ployed, with youth un­em­ploy­ment reach­ing about 60% by the end of last year.

Pre­pared be­fore the bi-an­nual meet­ing in Brussels next week of the ad hoc li­ai­son com­mit­tee, which co­or­di­nates in­ter­na­tional donor sup­port for the Pales­tini­ans, the re­port is pub­lished al­most a year af­ter the 50-day con­flict be­tween Gaza mil­i­tants and Is­rael, in which about 2,200 Pales­tini­ans were killed. On the Is­raeli side, 67 sol­diers and six civil­ians were killed.

“Gaza’s un­em­ploy­ment and poverty fig­ures are very trou­bling and the eco­nomic out­look is wor­ry­ing. The cur­rent mar­ket in Gaza is not able to of­fer jobs, leav­ing a large pop­u­la­tion in de­spair, par­tic­u­larly the youth,” said Steen Lau Jor­gensen, World Bank coun­try direc­tor for the West Bank and Gaza.

“The on­go­ing block­ade and the 2014 war have taken a toll on Gaza’s econ­omy and peo­ple’s liveli­hoods. Gaza’s ex­ports vir­tu­ally dis­ap­peared and the man­u­fac­tur­ing sec­tor has shrunk by as much as 60%. The econ­omy can­not sur­vive with­out be­ing con­nected to the out­side world.”

In un­com­pro­mis­ing terms, the World Bank de­scribes Gaza’s econ­omy as “tremen­dously dam­aged by re­peated armed con­flicts, the block­ade and in­ter­nal divide” and “re­duced to a frac­tion of its es­ti­mated po­ten­tial”.

Gaza has been gov­erned by the Is­lamist group Ha­mas since 2007 and has strug­gled with mount­ing prob­lems since the clo­sure of the smug­gling tun­nels to Egypt, which had acted as an eco­nomic and so­cial pres­sure valve.

Ha­mas has strug­gled to pay salaries and also lost a key stream of rev­enue from its tax­a­tion of the smug­gling route. Egypt has largely closed the Rafah ter­mi­nal on its bor­der since Oc­to­ber, when it be­gan work to cre­ate a buf­fer zone along the bor­der and step up ef­forts to de­stroy the tun­nel trade.

The re­port adds that real GDP per per­son has dropped by a third in the last 20 years.

The re­port, to be pre­sented next week, says events in the last two years – in­clud­ing Egypt’s clo­sure of the smug­gling tun­nels and last sum­mer’s war – re­duced Gaza’s econ­omy by al­most half a bil­lion dol­lars.

“The clo­sure of tun­nels with Egypt and in par­tic­u­lar the 2014 sum­mer war,” say the re­port’s au­thors, “shaved some $460moff Gaza’s econ­omy, lead­ing to a 15% con­trac­tion of its GDP.”

They add: “In Gaza, un­em­ploy­ment in­creased by as much as 11 per­cent­age points to reach 43% – prob­a­bly the high­est in the world – and that in the West Bank it dropped by one per­cent­age point.

“In Gaza, the poverty rate reached 39% and with poverty in the West Bank at 16%, the ag­gre­gate poverty rate amounted to 25%.

“Nev­er­the­less, the growth in gov­ern­ment re­cur­rent ex­pen­di­tures of 9% was large and un­sus­tain­able; growth in the gov­ern­ment wage bill and net lend­ing are of par­tic­u­lar con­cern.

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