Critical developments in the Palestinian economy during 2000-2001 have exposed long-standing structural weaknesses, which have been aggravated by sharp declines and widespread disruption in economic activity over the period. A high and volatile rate of unemployment, a chronic trade deficit and a widening gap between investment needs and national savings reflect persistent imbalances, which have been reasserted during the recent crisis. While some significant structural changes have occurred over the decade, these were not paralleled by notable improvement in the domestic economy's supply capacity, undermining its ability to create enough jobs for its labour force, produce enough exports to pay for imports and generate savings for financing investments. Furthermore, the weak contribution of domestic sources to growth of national income increases the economy's vulnerability to external shocks. Despite the progress in institution building, regulatory reform and economic policy formulation made during the 1994-1999 interim period ushered in by the Israel-Palestine peace accords, over nine months of economic crisis have reversed many of these gains. In addition to losses of at least a quarter of national income and damage to economic and trade infrastructure, the crisis has resulted in sharp falls in Palestinian household income, massive unemployment and increasing poverty. The Palestinian Authority will need to elaborate swiftly a programme of recovery and reconstruction in the context of a sustained economic policy formulation process. While UNCTAD technical assistance to the Palestinian people has attempted to respond to some of the new needs generated by the crisis in the trade and related services sectors, it has maintained a focus on long-term capacity building efforts
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International Institute for Trade and Developement : UNCTAD Collection
