Palestine is located on the eastern coast of the Mediterranean Sea. It comprises two non contiguous areas – the Gaza Strip and the West Bank. Gaza, the smaller of the two, is bordered by Egypt and Israel, while the West Bank is surrounded by Jordan and Israel.
The services sector accounts for the largest proportion of Palestine’s GDP. Its economy is also highly dependent on Israel, which controls the movement of goods and labour inside and out of Palestinian territories. With limited access to resources, Palestine has suffered from a lack of inward investment, causing the local authorities to depend on international aid for budget and development projects.
In Hamas-controlled Gaza, its three wars with Israel over the past eight years have caused high unemployment and sharp private-sector contraction, ravaging much of its industrial infrastructure. The Palestinian Central Bureau of Statistics (PCBS) reported that the overall unemployment rate in 2015 was 41%. The 2014 war also displaced more than half a million of people from Gaza, effectively exiling its middle class and touching off a recession. Reconstruction process has so far been patchy and slower than expected. In April 2017, the IMF forecast that medium-term GDP growth of around 3.4%, with Gaza expected to grow about 5% compared to 2.7% for the West Bank. Nonetheless, Gaza economy is not expected to reach its 2013 annual level until the end of 2018.
On the West Bank, which is under the control of the Fatah-led Palestinian Authority (PA), economic growth has decelerated due to a decline in donor aid and cuts in government spending. This is despite attempts to implement economic and security reforms. Customs revenues are collected by Israel on behalf of the PA, though the monthly repatriation was withheld for months in 2015 due to growing bilateral tensions, which further negatively impacted the economy. The World Bank estimated that the PA would suffer an annual revenue loss of US$285 million under the current arrangement with the Israeli government.
Palestine has also suffered from persistent trade deficits, largely due to the limited access to key resources and Israeli restrictions. Palestine mainly exports limestone, fruit and vegetables. Its primary imports are oil, food, consumer goods, machinery and metals. Israel, China, Turkey, Germany, Italy and France constitute its primary trading partners.
Palestine has attracted limited foreign investments apart from foreign aid. According to UNCTAD statistics, cumulative FDI in Palestine totalled US$2.59 billion in 2016, little changed from 2013. China’s FDI in Palestine is far from significant.
In his visit to China in July 2017, Palestinian president Mahmoud Abbas appealed to Chinese to add Palestine to their list of tourist destinations. Four agreements were signed including those on economic cooperation and human resources training. In addition, China will support the building of Palestine’s Tarqomia Industrial Zone, west of Israeli city Hebron.
In visiting Palestine in 2016, China's Special Envoy on the Middle East Issue remarked that the Belt and Road Initiative could play an important part in any future Middle East peace process, hopefully bringing peace and economic opportunities to the Palestinians.
The Palestinian Investment Promotion Agency (PPA) is responsible for investment promotion and has earmarked ICT, food and beverage, textiles and garment, tourism, drug and pharmaceuticals, manufacturing and agriculture for investment promotion. Information on investment climate and incentive schemes offered can be found on the PPA website.
(If you are from a member state of the European Union ("EU") / European Economic Area ("EEA")), PLEASE tick here if you accept our use of your provided data for direct marketing purposes.
*For non-EU/EEA customers, please skip this box which is solely for EU/EEA customers as required by the relevant data protection law in the EU.
Thank you for subscribing our marketing intelligence.