MACROECONOMIC DEVELOPMENTS AND OUTLOOK
IN THE WEST BANK AND GAZA
AD HOC LIAISON COMMITTEE MEETING
LONDON, DECEMBER 14, 2005
I. RECENT ECONOMIC DEVELOPMENTS
1. Economic activity in the West Bank and Gaza (WBG) continues to recover but remains highly dependent on political and security developments. Real GDP continued to rebound in 2004 from the effects of the Intifada, with growth estimated at 6 percent, driven by increases in manufacturing, trade, and transportation. In addition, speculative real estate activities boosted construction in some parts of the West Bank. Growth continued at a similar pace in the first half of 2005, supported by a substantial increase in public spending, with notable increases in activity in trade, transportation, services, and agriculture, which together constitute nearly half of GDP. In addition, the Israeli disengagement from Gaza fuelled activity in construction and real estate. Consequently, GDP growth is projected to remain at around 6 percent in 2005. Nonetheless, economic activity remains well below its potential, constrained by the volatile security situation, continued Israeli restrictions on passage, and further extensions of the separation wall—all of which continue to severely limit the movement of Palestinian goods and people. The recent agreement on movement and access is a very welcome step that should help to ease some of these constraints.