The pattern of closure imposed by Israel since October 2000 varies
greatly from one place to another. Due to this pattern, some small
Palestinian villages have literally been cut off from the rest of
the world, whereas movement of goods and people within large
Palestinian cities have not been restricted, with the notable
exception of Hebron. The porosity of external frontiers has
remained greater for the West Bank (with Israel and Jordan) than
for Gaza (with Israel and Egypt). On the other hand, the severity
of internal closures has generally been higher in the West Bank
than in Gaza since October 2000. The areas of Salfit, Qalqilia,
Hebron, and Jericho have experienced severe closures more
frequently than other areas in the West Bank, whereas the same also
applies to Khan Yunis and Rafah in comparison to Gaza City and
Jabalya in Gaza.
It is most likely that the geographical variations in severity and
length of closures have differently affected the populations,
depending on where they live and work. Using recent information on
employment, we estimate that 57 percent of people who have fallen
into poverty since October 2000 - the "new poor" - are to be found
in Gaza. Almost 40 percent of the total number of "new poor" are
concentrated in the two regions of Gaza City and Khan Yunis. In the
West Bank (excluding the Governorate of Jerusalem), it is estimated
that one-third of the remaining 43 percent of the "new poor" is
concentrated in the Governorate of Hebron. Unfortunately, in the
absence of comprehensive statistical surveys as of April 2001 on
current Palestinian living conditions, it remains difficult to
assess more precisely where closures have had the most detrimental
impact.
However, before October 2000, there were already great differences
in poverty across localities. The availability of detailed poverty
maps could help locate more precisely efforts to alleviate poverty,
whether poverty was the consequence of closures or not. Moreover,
our estimates on the impact of the crises in each region clearly
suggest that it is in the poorest regions that we observe the
largest number of "new poor". This is most likely due to the fact
that the poorest regions are the most vulnerable to negative
economic shocks, such as internal and external closures. Therefore,
knowing where the poor were before the crisis is probably a good
indication of where the poor are now.
Economic Output
The World Bank estimates that Gross Domestic Product (GDP) per
capita was reduced by approximately 10 percent in 2000 compared to
1999. Indicators pointed to robust growth during the first three
quarters of 2000, but the extremely weak performance during the
last quarter of 2000, due to the outbreak of the Intifada, pulled
down the average for the year as a whole.
Real Gross National Income (GNI) per capita, which includes net
factor income from abroad, notably worker remittances from
Palestinians working in Israel, is estimated to have declined even
further, approximately 12 percent compared to 1999. This is because
remittances almost entirely vanished in the last quarter of 2000,
as Palestinian workers were not allowed or able to reach their
usual workplace in Israel or Israeli settlements.
Labor force figures released by the Palestinian Central Bureau of
Statistics (PCBS) covering the first quarter (Q1) of 2001 indicate
that some stabilization of the economic situation has taken place
recently. In particular, the dramatic increase in unemployment seen
during the first three months of the Intifada has apparently come
to a halt. Also, the number of Palestinians who are able to get to
their workplace in Israel has increased slightly.
Private Consumption and Living Standards
A continuation of the crises will inevitably imply a further
worsening of the economic situation and living standards.
Households will find it increasingly difficult to cope with the
drop in income. Already now, a significant share of households, in
particular in Gaza, has been forced to sell family jewelry,
postpone paying bills and borrow money, in order to make up for the
drop in incomes, according to a recent survey carried out by the
PCBS. None of these measures are, of course, sustainable in the
longer term.
Other household coping strategies include turning towards
agricultural production of basic food products or emigrating. While
necessary in the current situation, and sustainable even in the
longer term, these strategies may severely hamper the long-term
growth potential of the Palestinian economy. Examples of the
adverse effects include skewing production towards low-value added
products intended for the local market rather than high-value added
products for export markets, and depletion of the human resource
base of the Palestinian economy through "brain drain."
According to the PCBS survey, approximately 80 percent of
Palestinian households have responded to the crises by reducing
expenditures. The survey did not measure the magnitude of the
reduction, but according to the survey, the median household income
by March 2001 was almost 50 percent lower than the pre-Intifada
level. It must be expected that household consumption has declined
somewhat less than income. First, household coping strategies
mentioned above have almost certainly cushioned the impact on
consumption. Secondly, the survey indicates that approximately 40
percent of households have drawn on savings. Finally, households
seem to have adjusted the composition of expenditures by cutting
down non-essential expenditures in order to preserve the level of
expenditures on basic goods, notably food.
According to PCBS, an estimated 64 percent of the population in the
Palestinian Territories are currently living below the poverty
line. PCBS uses a poverty line of NIS 1622 for a typical household
consisting of two adults and four children.
PCBS base their estimate of poverty on the reported monthly income
(rather than consumption) of the households in their survey, making
comparisons to earlier estimates of poverty difficult. Moreover,
income data is usually considered to be less reliable than
consumption data.
As consumption is expected to have declined less rapidly than
income, both as a result of coping strategies by the households and
as a result of the increase in emergency assistance provided to
households by various donors, NGO's and the PA, poverty measured
using consumption may be more severe. Nevertheless, there is no
reason to believe that poverty has not continued to increase since
December 2000 where the World Bank estimated that poverty affected
one-third of the population. The World Bank projects that one-half
of the population could fall below the poverty line by the end of
2001, if the situation does not change.