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West Bank Economy Grows 9% in First Half, Gaza by 16%, IMF Says

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Sept. 14 (Bloomberg) -- The Palestinian economy in the West Bank is estimated to have grown an annual 9 percent in the first half of this year, as Israel eased access restrictions, according to the International Monetary Fund.

The Gaza economy expanded about 16 percent during the same period, boosted by Israel’s relaxation of restrictions on imports, Oussama Kanaan, the organization’s chief of mission in the West Bank and Gaza, said today. The West Bank and Gaza are heading for 8 percent growth this year, up from 7.2 percent in the West Bank in 2009, and 5.4 percent in Gaza, Kanaan said.

“For growth to be sustained, it is essential that the remaining restrictions on economic activity be lifted,” Kanaan said. “Gaza’s recovery will wane unless the ban on exports and on imports of private-sector capital inputs is removed. Similarly, the West Bank’s growth is bound to slow with the persistence of restrictions on movement and access.”

Israeli Prime Minister Benjamin Netanyahu lifted roadblocks across the West Bank in an effort to promote Palestinian economic growth. Netanyahu and Palestinian Authority President Mahmoud Abbas who started peace negotiations in Washington on Sept. 2, met for a second round today at the resort of Sharm el-Sheikh in Egypt. Israel says the roadblocks were necessary to stop attacks by militants.

Closed Border

In the West Bank, growth has been bolstered by improvements in government management by the Palestinian Authority, which have been supported by donor aid, according to the findings of the mission, Kanaan said. Its conclusions will be included in a report scheduled to be presented to donor countries on Sept. 21.

The Israeli government said on June 20 it will loosen its blockade on Gaza so that all food will be let in and only weapons and items that have a military use are kept out. Israel closed its border with Gaza and restricted imports after Hamas seized full control of the coastal enclave in 2007 following a violent struggle with Abbas’ secular Fatah movement, once its partner in a power-sharing arrangement.

The Palestinian economy is expanding from a “very low base,” especially in Gaza, where living standards are below 1994 levels, Kanaan said. While the West Bank has “fared better,” the overall growth for both areas has been weaker than for countries that had a comparable per-capita gross domestic product in 1994, he said.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net