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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.

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