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Abstract
Economic conditions in the West Bank and Gaza Strip have deteriorated substantially since 1993 due to adverse political developments.1 The imposition of generalized border closures triggered by security incidents in Israel, which are characterized by strict security controls on the movement of goods and labor into and out of the West Bank and Gaza Strip, as well as intermittent total closures that virtually prohibited such movement, have led to an increase in the rate of unemployment to about 30 percent, a contraction in external trade, disruptions to the implementation of the public investment program, and a steady erosion in private sector confidence. By the end of 1996, the unemployment rate was 15 percentage points higher and income per capita about 20 percent lower than in 1993, and only modest improvements had been made in developing the domestic productive base and infrastructure (Table 1). On the positive side, despite the unfavorable overall economic and political environment, the Palestinian Authority persevered in the pursuit of a prudent fiscal policy and in strengthening economic institutions and processes.
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