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Middle East: Economic Situation

Volume 498: debated on Monday 2 November 2009

To ask the Secretary of State for Foreign and Commonwealth Affairs what reports he has received of progress in economic development in (a) the West Bank and (b) Gaza; and if he will make a statement. (296618)

The economic situation in the Occupied Palestinian Territories remains difficult. According to the World Bank, gross domestic product is estimated to have declined by 34 per cent. in real per capita terms over the last decade.

More recently, increased international aid in 2008 and 2009 has allowed Palestinian Prime Minister Fayyad to stabilise the public finances and pay salaries in both the West Bank and Gaza. The economy of the West Bank has also benefited from the improved security provided by the Palestinian security forces and from the removal of some obstacles to movement around the West Bank by the Israeli Government.

The International Monetary Fund recently estimated that growth in the West Bank could reach 7 per cent. for 2009. But unemployment remains close to double the level of a decade ago and much more needs to be done to return the economy to sustainable growth.

In Gaza, the situation remains extremely serious. Israeli restrictions mean the productive sector of the economy has come to an almost complete standstill. Some 95 per cent. of the manufacturing sector has shut operations and exports have effectively ceased. The economy now depends on Palestinian Authority and UN salaries together with illicit earnings from smuggling as the main sources of income. Official unemployment stands at 42 per cent. but the actual figure is likely to be in excess of 50 per cent. and there are worrying levels of aid dependence.

We are working to support economic growth. We also call on the Israeli Government to go further in removing movement restrictions, to release telecoms frequencies for a second Palestinian mobile operator, to resume normal banking relations with Palestinian banks and to remove other barriers to economic growth.