Palestinian economy set for 5-6 percent growth amid aid shortfall

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The Palestinian economy is on track for 5 to 6 percent growth this year as a shortfall in international aid continues to take its toll, according to a senior minister.

The forecast is far below the average growth rate in 2010-2011, which stood at around 11 percent. The Palestinian economy grew by about 6 percent last year.

Despite the downward trend, the Palestinian minister of economy Jawad Naji Awad Hirzallah said the projections were a “good indication of growth” given cuts in aid and the revenues Israel collects on behalf of the Palestinian Authority.

“Due to the global financial crisis and Israel halting the transfer of tax and tariff money it collects for the Palestinian Authority, many of the funding countries did not meet their obligations of providing aid to the Palestinians,” he told Al Arabiya.

“This has had a negative impact on our economy, especially in the second half of 2011 and overall in 2012, which is bound to affect growth rates in 2013… We expect the growth rate in 2013 to be 5 to 6 percent. But against a backdrop of negative economic conditions, this is a good indication of growth.”

The Palestinian Authority’s draft budget, which amounts to almost $3.9 billion, indicates $1.4 billion would have to come from foreign financing.

Prime minister Salam Fayyad lamented a lack of payment of foreign aid as he presented the 2013 draft budget to politicians and economists in Ramallah late last month.

Hirzallah said aid was essential to bridging the gap in Palestinian finances.

“We aim to bridge the deficit through foreign aid from funding countries, who have committed to funding recently in Brussels,” he told Al Arabiya. “We are hoping that Arab countries can also stick to their commitments towards Palestinians, especially when discussing a regional security network that was agreed on in the Baghdad summit.”

A top official in Washington last month said the U.S. had unblocked almost $500 million in aid to the Palestinian Authority which had been frozen by Congress for months. Israel is set to unblock revenues it collects on behalf of the Palestinian Authority, frozen last year in retaliation for the Palestinians winning upgraded UN status.

The IMF sees growth of 5 percent this year in the Palestinian territories, and expects a “continuing downward trend in subsequent years.”

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