JERUSALEM, February 22. 2021 – The impacts of COVID-19 continue to hit hard an already faltering Palestinian economy, resulting in an expected contraction of the Gross Domestic Product by 11.5 percent in 2020, one of the most severe declines on record. Under the existing fiscal crisis, an under-equipped health sector and uncertainty around the vaccination rollout, a new World Bank report calls for coordination at all levels to fight the spread of COVID19 and ensure the continuity of vital health services.
The Palestinian economic monitoring report will be presented to the Ad Hoc Liaison Committee (AHLC) during a virtual meeting on February 23, 2021, a policy-level meeting for development assistance to the Palestinian people. It highlights critical challenges facing the Palestinian economy and describes the impact of COVID-19 on the health sector and the policy measures adopted.
Even before COVID-19 struck, the outlook for the Palestinian economy was bleak with low growth levels, persistent fiscal deficits, high unemployment rates, and growing poverty. The situation worsened with the combined effects of the pandemic and the cessation of clearance revenues (import taxes collected by Israel on behalf of the PA), leading to one of the sharpest contractions in economic activity.
“The COVID-19 pandemic and its impacts exacerbated an already difficult and worrying situation for the Palestinian economy in 2020. As the pandemic becomes even more prolonged, the additional strains on the fragile socio-economic and health systems make it much harder to effectively deal with the crisis. The challenges in rolling out COVID-19 vaccines add further uncertainty for the Palestinian people and economic recovery”, said Kanthan Shankar, World Bank Country Director for West Bank and Gaza.
The crisis impacted employment levels, particularly in sectors that have been affected by social distancing measures, such as tourism, restaurants, construction, and for workers who cross to Israel. The unemployment rate peaked during the third quarter of 2020, and then eased to 23.4 percent in the fourth quarter: 15 percent in the West Bank and 43 percent in Gaza. Projections suggest that the poverty rate increased to around 30 percent with approximately 1.4 million people living in poverty. In addition, the decision to stop accepting clearance revenues from the Government of Israel (from May to November 2020) reduced resources available to respond to the health crisis. The combined effect of the pandemic, the cessation of clearance revenues and a 20 percent drop in aid to the budget resulted in a fiscal gap after aid exceeding US$1 billion—the highest in years.
As the COVID-19 pandemic worsened in both the West Bank and Gaza, it revealed pre-existing weaknesses in the Palestinian health system, long affected by protracted conflict, limited budgets, and fragmented governance and service delivery challenges. The Palestinian territories have one of the lowest testing rates in the region and the positivity rate of over 21 percent indicates an uncontrolled spread of the pandemic, according to WHO guidance.
The pandemic has severely disrupted financing for other essential health services, such as maternal and child health, as well as non-communicable diseases. The suspension of coordination with Israel significantly disrupted outside medical referrals for life-saving treatments in Israel that are lacking in the Palestinian territories.
“The Palestinian health sector faces significant challenges, and in times of COVID-19, improved coordination between the West Bank and Gaza, as well as between the Palestinian Authority and Israel, would serve as a regional public good in combatting the virus and ensuring recovery of the economy. It is also in the benefit of all to ensure high vaccination coverage rates”, added Shankar.
The PA expects to vaccinate 20 percent of the population with free doses supplied under the international Covax program, backed by the WHO. The Ministry of Health (MoH) plans to procure additional vaccines to achieve coverage of 60 percent of the population. Estimates on COVID-19 vaccine purchase and deployment cost suggest that a total of about US$55 million would be needed to cover 60 percent of the population, of which there is an existing gap of $30 million. So far, the PA has received fewer than 20,000 doses of vaccines. While Israel has been leading the world in terms of per capita vaccinations, the Israeli MoH has not formulated an allocation strategy to support the territories, beyond providing 5,000 vaccines for Palestinian doctors.
Among its recommendations, the report advocates for improved coordination between the PA and Israel in order to control COVID-19 and administer the vaccine, and for reducing border control’s challenges to allow the procurement of lifesaving medical supplies. Such coordination is crucial as the PA finalizes its COVID-19 vaccine deployment plans. The report also recommends setting up a Public Health Emergency Operations Center to centralize data management for informed decision-making and to serve as an effective coordination body with all partners. With the loss of a significant amount of revenue, donors can help mitigate the current health challenges with increased investments to help control COVID-19 while helping ensure the continuity of essential health services and vaccine introduction.
