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Economic Developments in the Palestinian Territories (English)

The Palestinian economy has been in a very difficult situation in 2020 facing triple crises reinforcing each other: i) a resurgent COVID-19 outbreak, ii) a severe economic slowdown, and iii) a political standoff with the Government of Israel that disrupted clearance revenues for over six months (May-November 2020). Consequently, GDP for the entire year is expected to contract by about 8 percent. Even though the Palestinian Authority’s recent decision to resume coordination with Israel is expected to ease the fiscal stress, a large financing gap (deficit after expected grants) of US$760 million is projected for 2020 and additional efforts by the Palestinian Authority, the donor community and Israel remain crucial to secure additional financing. Given the role that clearance revenues could play as a potential stabilizer for the Palestinian economy, ensuring their uninterrupted flow is a key prerequisite for reducing volatility and maintaining economic stability going forward. The COVID-19 crisis has further compounded financial sector risks, driving stability concerns to new highs especially given the rise in direct and indirect exposure of the banking system to the PA, and the deteriorating quality of credit portfolios for key economic segments. Hence, policies to mitigate the financial impact of COVID-19 need to be targeted, well-designed, maintain sound prudential regulations, and ensure trust and confidence in the banking system.


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  • Country

    West Bank and Gaza,

  • Region

    Middle East and North Africa,

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  • Doc Name

    Economic Developments in the Palestinian Territories

  • Keywords

    Financial Sector; fiscal multiplier; lack of access to markets; non performing loan; bilateral trade; recent years; reduction in public spending; import tax; unemployment rate; domestic revenue; economic slowdown; banking system; partial credit guarantee; financing need; lender of last resort; number of new infections; Drivers of Economic Growth; legal and regulatory framework; net lending; financial inclusion; utility bill; fixed exchange rate; transfer of responsibility; public revenue; external financing; housing finance; donor community; high unemployment; banking sector; microfinance institution; long-term finance; financial service; credit exposure; economic relation; domestic bank; movement of labor; exchange of information; foreign direct investment; act of defiance; tier 1 capital; accumulation of arrears; lack of control; availability of credit; wages and salary; financial sector risk; revenue sharing arrangement; primarily due; return on asset; stock of debt; domestic banking sector; point of entry; public pension fund; domestic public debt; financial sector stability; private sector borrowing; private sector borrower; financing of terrorism; fees and charge; state of emergency; access to finance; new policy initiative; prices of import; development finance institution; capital market development; central government operation; basic financial service; rates of infection; impact of investments; double bottom line; affordable housing finance; lack of skill; SME credit risk; means of payment; pattern of infection; take time; persistent fiscal deficits; sovereign wealth fund; international good practice; political development; classified loan; local bank; consumer loan; industrial production; internal control; Fiscal policies; fiscal policy; percent change; several months; weak demand; fuel import; real sector; diffusion index; fiscal forecast; social distance; financial intermediaries; customs law; correspondent bank; tax official; low trade; liquidity buffer; local economy; digital finance; Payments for Services; bonded warehouse; domestic tax; fiscal stress; fiscal situation; financial infrastructure; credit availability; prudential regulation; temporary suspension; liquidity concerns; solvent enterprise; financial impact; downside risk; limited resources; monetary base; financial industry; real time; transfer point; recent development; legal action; registered business; tax authorities; tax authority; bank transfer; customs broker; tax rebate; computer system; clearance system; economic volatility; fiscal loss; economic hardship; mobile money; additional revenue; financial implication; social impact; liaison committee; retail price; long-term agreement; financial liquidity; clearance process; administrative cost; Health Service; financial return; private finance; domestic financing; legal framework; bank group; short supply; Financial Stability; risk oversight; external influence; operational independence; business model; credit growth; financial asset; financial system; binding constraint; Bank Credit; reporting procedure; risk base; Terrorism Financing; corporate restructuring; financial crisis; financial oversight; liquid asset; conservation buffer; large bank; financial intermediation; bank intermediation; travel restriction; insolvency practitioner; necessary support; disproportionate impact; payment system; excessive risk; cash holding; housing need; foreign trade; informal sector; trade finance; informal housing; housing loan; private lending; housing supply; consumer service; effective demand; deposit ratio; direct credit; traditional banking; existing schemes; prudential requirements; holistic approach; perceived risk; employee account; money laundering; integrity standard; liquidity problem; limited information; Indirect Exposure; credit demand; financial considerations; bank channel; indirect channel; bank exposure; credit supply; fiscal imbalance; direct loan; nonperforming loan; loan portfolio



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Economic Developments in the Palestinian Territories (English). Washington, D.C. : World Bank Group.