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Last Updated: May 11, 2023

Å·ÃÀÈÕb´óƬ began its program of assistance in the Palestinian territories in November 1992. Grants, financed from the World Bank¡¯s own resources and supplemented by co-financing from development partners, fund the Palestinian Authority¡¯s (PA) projects in water, energy, urban and local development, public financial management, social protection, education, health, solid waste management, digital development, the financial sector, and private sector development. 

The peace talks between the Palestinians and Israelis remain stalled, and the political context deteriorated further at the start of 2023. Despite continued efforts at reconciliation between the polities of Gaza and the West Bank, progress remains elusive. Movement and access restrictions imposed by Israel^[1] continue to limit Palestinian development in the West Bank while creating conditions akin to a nearly closed economy on Gaza.

At the end of 2022, unemployment in the territories was 24.4 percent, two percentage points lower than the previous year. However, the divergence in joblessness between the West Bank and Gaza continued to mirror the differing severity of the restrictions to access and movement imposed on them, with the former registering 13.1 percent unemployment and the latter a striking 45.3 percent.

The Palestinian economy continued its post-pandemic rebound in 2022, registering full year Real Gross Domestic Product (GDP) growth of 3.9 percent, following the post-COVID rebound spurt of 7 percent in 2021. The continued growth was driven by consumption, which in turn was boosted by an increase in the number of Palestinians working in Israel, where workers earn more than twice the daily average wage in the West Bank. The PA¡¯s revenues grew significantly, driven by increased economic activity and successful efforts to expand the tax base. As spending remained stable, the deficit decreased by about 60 percent in 2022 compared to the year before, albeit at a high social cost with fewer payments made to poor households. Despite these positive fiscal developments, conditions are expected to remain tight in 2023 as donor aid is expected to remain at historically low levels, below 2 percent of GDP of the Palestinian territories. 

Regarding the economic outlook, downside risks remain elevated. Growth is projected to soften during 2023 and beyond with nominal GDP growth expected at around 3 percent and real GDP growth stagnant due to population growth trends. This modest expansion will be driven by a continued recovery in consumption and increase in the number of Palestinians working in Israel. However, the interconnectedness of the two economies also exposes the Palestinian side to additional downside risks, which may be further exacerbated if the recent escalation of clashes between Palestinian and Israeli forces extends over several months and results in a tightening of restrictions, including on the cross-border movement of workers.

^[1] According to the Government of Israel, these restrictions are for the purpose of enhancing the security of Israel and Israeli citizens

Last Updated: May 11, 2023

In line with the two focus areas of the World Bank Group FY22¨C25 Assistance Strategy for the West Bank and Gaza, a) Strengthening Institutions for Economic and Social Prosperity; and b) Boosting Innovation and Diversification for a Well?Connected Palestinian Economy, the Bank has financed projects and operations to support the resilience of Palestinian institutions and respond to the emergency needs in Gaza. In 2022, four projects and a development policy grant¡ªfocusing on education, energy, institutional reform, public financial management, and social protection¡ªwere approved and are currently under implementation. Four additional projects focusing on water, urban development, health and private sector development, alongside a new development policy grant promoting fiscal and financial sector reforms, are being launched or scaled-up in the first half of 2023.

Narrowing gender gaps, maximizing climate resilience, leveraging digital technology, and promoting citizen engagement remain critical in WB&G¡¯s portfolio. Ongoing Analytical work continues to guide budget support and investment projects and provide diagnostics and policy recommendations to the Palestinian Authority (PA). Furthermore, the Bank is presently preparing two core analytical pieces. The first piece, in a joint effort with the International Finance Corporation and the Multilateral Investment Guarantee Agency, is a country climate and development report that will help identify and prioritize development interventions that are climate-responsive. The second is a public expenditure review covering the health, education, and pension sectors, including core public expenditure elements such as the wage bill. The review will eventually inform both investments and policy reforms in the respective areas.

Last Updated: May 11, 2023

In 2022, the World Bank supported:

• Improved governance and transparency with 100 percent of procuring entities at the central level and 83 percent of municipalities using the single procurement portal to publish their procurement plans and contract award notices.
• The acceleration in the production and auditing of financial statements, resulted in the five-year backlog of audited financial statements being fully cleared, reflecting increased financial accountability and transparency. The 2020/2021 joint audited financial statements have been completed and were published in January 2023.
• Improved living conditions for over 470,000 people in the West Bank and Gaza through municipal investment projects that have developed or enhanced roads, street lighting, solid waste management, wastewater treatment, and water and electricity supply¡ªthe latter especially by advancing the use of solar energy.
• Enhanced targeting of poor households, through the recertification of around 134,000 registered households benefiting from the Cash Transfer Program. The recertification is anchored around the multidimensional poverty concept that focuses on various forms of social deprivations, beyond the monetary dimension, including health, education, employment, housing, and others.
• Improved kindergarten (KG) services through a) the rehabilitation of 237 KG classrooms in Gaza, damaged during the May 2021 conflict, benefitting nearly 10,000 children.

Last Updated: May 11, 2023

Development assistance to the PA has experienced a steep decline over the last fifteen years. In 2008, the PA received approximately $2 billion in development funds, which accounted for 27% of Palestinian GDP. However, as of 2022, the PA has received only $350 million in development funds, which constitutes a mere 1.8% of GDP. It is anticipated that this trend will persist in 2023. This has been crippling for the Palestinian economy and PA fiscal status amidst the continued movement and access restrictions imposed on the Palestinians. Å·ÃÀÈÕb´óƬ is collaborating with development partners to maintain or increase donor funding for greater impact, through close coordination across sectors and by enabling donors to channel their resources through secure trust funds.

The Palestinian Umbrella for Resilience Support to the Economy Multi-Donor Trust Fund, or PURSE MDTF, was launched in June 2021 and provides donors a consolidated channel to fund a broad scope of activities aligned with the current Assistance Strategy and the PA's National Development Plan 2021-2023. As of March 31, 2023, a total of $74 million has been channeled through PURSE and its associated trust fund (EU Support for Palestinian Economy and Resilience, ESPERE). Since its inception, PURSE has received contributions from Norway, France, Switzerland, and the European Commission. The PURSE MDTF has co-financed four recipient-executed operations and supported eight Bank-executed advisory services and analytics (ASA), resulting in several positive outcomes. One such outcome was [BB1] the successful emergency cash transfer to over 40,000 households affected by the pandemic through the PURSE-financed social protection project. Additionally, the eleventh development policy grant, which was leveraged by PURSE, facilitated the passing of updated legislation and the issuance of over 400,000 e-wallets, thereby supporting the digital foundations of the Palestinian economy.

The West Bank and Gaza Partnership for Infrastructure Development MDTF (PID MDTF)  provides financial and technical support for the coverage, quality, and sustainability of Palestinian infrastructure, focusing on energy, water, and urban development. In the last three years, six development partners, including France, Italy, the Netherlands, Norway, Sweden, and the United Kingdom, have contributed $111 million to PID MDTF. Additionally, Australia, Denmark, Finland, and Portugal are current members of the PID MDTF who have made contributions in the past. Since the PID¡¯s launch in 2012, the total pledged amount from ten development partners amounts to $296 million. The PID MDTF has co-financed seventeen investment operations and supported twelve Bank-executed ASAs, leading to positive outcomes. Notably, the Gaza Solid Waste Management project co-financed by PID has significantly improved solid waste management services in Gaza, with approximately 96 percent of waste generated in the project area now being disposed of at the sanitary landfill constructed under the project. The project¡¯s success has benefitted an estimated population of 948,000 people.

The Public Financial Management Improvement MDTF (PFMI MDTF) has supported interventions and analytical work in public financial management and procurement. With a total contribution of $4.2 million from Denmark and the EU, the PFMI MDTF has enhanced the expenditure controls, financial accountability and procurement management of the PA and selected municipalities. This PFMI MDTF is expected to be discontinued end of 2023, with future activities in PFM and procurement to be taken up through the PURSE MDTF.

 ^[BB1]If this cash transfer already finished, change "is" to "was".