April 13, 2010 - 12:00am

Palestinian Authority economic growth has been largely driven by donor aid, and more private investment is necessary to ensure that the expansion is sustained, the World Bank said in a report Monday.

In 2009, the PA received almost $1.4 billion in budget support, following $1.8b. in 2008, allowing for expansionary fiscal policies to support growth, the report said. The share of sectors that are mostly government-funded, such as defense and public administration, rose from less than 21 percent of the economy in 1999 to almost 30% in 2009, it said.

“The revival of growth in the West Bank is impressive, but it is also precarious,” said the report, released in advance of an April 13 meeting of Palestinian, Israeli and donor country representatives in Madrid. “It is imperative that private investment take off.”

The PA economy expanded 6.8% last year, according to an International Monetary Fund report also released in advance of the meeting. West Bank gross domestic product increased 8.5%, while in the Gaza Strip, conditions remained “difficult” due to a blockade on goods and GDP grew 1%, it said.

PA efforts in the West Bank have resulted in improved security and more efficient service delivery, and together with Israel’s loosening of security restrictions, have significantly increased investor confidence, the World Bank report said. Still, there is “no sign” yet of a large-scale revival of private investment, it said.

The biggest jump in private business activity has been in the construction and real-estate sectors, with PA civil servants and nongovernmental organization employees forming the “backbone” of the market, the report said.


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