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Ulric Erickson von Allmen


The turmoil that erupted in the fall of 2000, and the closures that followed, have caused a sharp decline in economic activity in the West Bank and Gaza, not only dashing the prospects of a fourth consecutive year of rising per capita income but also rolling back most of the gains made in the previous three years. The shock is the worst experienced by the Palestinian economy in 30 years. Up until the crisis, the Palestinian economy was enjoying fairly solid economic growth and some positive policy developments had taken place with the Palestinian Authority (PA) making progress in improving economic governance. The fragile fiscal situation before the crisis—mainly because of weak expenditure control—worsened considerably in the aftermath of closures and turmoil.

Hamid R. Davoodi and Ulric Erickson von Allmen


The West Bank and Gaza has the highest population growth in the world.1 Years of high fertility rates have created a very young population structure, with roughly half of the population below the age of 15. Over the medium term, the demographics are projected to change in a way that will have profound economic implications. The fertility rate is projected to decline, causing a deceleration in the population growth rate and a rise in the average age of the population so that by 2025, the share of the population older than 15 will have increased to 64 percent from about 53 percent today. As a consequence, the labor force is projected to expand by 4–4 percent a year over the next ten years and at a modestly lower rate thereafter. The numbers would obviously be higher if the West Bank and Gaza were to experience immigration, a possibility after a final peace agreement with Israel.

Mr. Felix Fischer, Ms. Mona Said, and Rosa A. Valdivieso


A longstanding concern of Palestinian business people is the high level of transaction costs involved in conducting trade in the West Bank and Gaza, which for the most part are the product of a rather unique system of complex regulations and procedures mainly linked to Israeli security considerations. Reducing such costs is important to increase the overall competitiveness of the Palestinian economy and ensure its ability to develop, prosper, and integrate with the world economy.