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INTERVIEW-Palestinian economy to shrink 15 pct-monetary chief http://today.reuters.com/News/CrisesArticle.aspx?storyId=L09131972
Thu 9 Nov 2006
By Yara Bayoumy
BEIRUT, Nov 9 (Reuters) - The Palestinian economy is expected to shrink by at least 15 percent this year and will not recover unless "an economic siege" of the Hamas-led government is lifted, the head of the Palestine Monetary Authority said.
George Abed said that with the state sector "virtually paralysed", private companies were struggling to make money.
Since Hamas came to power in March, Western donors have cut direct aid to the Palestinian Authority over the Islamist movement's refusal to recognise Israel, renounce violence and accept past peace deals.
At the same time Israel has tightened access to the Gaza Strip and withheld customs and tax receipts worth $55-$60 million a month. Hamas accuses Israel and the United States of trying to topple its administration.
"Growth in 2005 was about 6 percent in real terms. Then in 2006, because of the economic siege GDP (gross domestic product) has declined by 15-18 percent ... in the first nine months of the year," Abed said late on Wednesday in an interview on the sidelines of a banking conference in Beirut.
"This year I think we will be down probably around 15 percent. I don't expect any major changes between now and the end of the year.
"Without a political solution that lifts the siege there is no way that the Palestinian economy can recover."
Hamas and the rival Fatah movement of President Mahmoud Abbas have sought to form a unity government in recent months as a way of lifting crippling restrictions. Hamas beat the once dominant Fatah in January elections.
The Islamists were partly spurred into talks after widespread strikes by government workers over state salaries that have largely been unpaid since March.
STATE SECTOR PARALYSED
Abed said about $25 million a month collected by banks and used to reduce government debt had not been turned over to the government since banks in Gaza and the occupied West Bank, fearing U.S. sanctions, were refusing to handle state funds.
The United States regards Hamas, which does not recognise Israel's right to exist, as a terrorist organisation.
Abed said unemployment this year had increased to more than 45 percent in Gaza and over 35 percent in the West Bank.
The figures could rise further if instability due to Israeli military assaults in the Palestinian territories and internal violence between Hamas and Fatah continued, he said.
Abed said the private sector had been discouraged from new investments because firms were unable to sell to a government that has little funds to make payments.
"Exports are (also) very severely restricted because of the closure of Gaza and the state of siege that Israel has imposed," he added.
Israel says it shuts crossings into Gaza and imposes curbs on movement in the West Bank due to the threat that Palestinian militants will try to carry out attacks inside Israel. Militants have attacked crossing points in the past.
The private sector was basically relegated to subsistence activity from non-governmental organisations, international organisations, banks and some services, Abed said.
"The state sector is virtually paralysed, the private sector is stagnant or declining," Abed said.
"External assistance can be helpful but there has to be a formula that brings the international community back into a relationship with the Palestinian government. So we're at a stalemate at this point and I think this will last for a few more months."
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