The Palestinian economy won't grow in 2008, largely due to continued Israeli restrictions on Palestinian movement, and despite massive foreign aid and Palestinian reform efforts, the World Bank predicted Sunday. Palestinian economic recovery is seen as crucial for U.S.-backed Mideast peace efforts. The international community hopes improvement in living standards, after eight years of downturn, will shore up support for peace talks among Palestinians. But the talks have yielded little change on the ground - including the continued presence of hundreds of roadblocks that Israel says are essential to its security, but severely hamper the movement of people and goods within the West Bank. In December, donor countries pledged $7.7 billion over three years to help fund a three-year Palestinian reform and development plan for the West Bank and Gaza. The idea was to gradually cut government spending and revive the private sector, which has been hit hard by Israeli-Palestinian fighting and Israeli travel restrictions. Eventually, the Palestinians were to become less dependent on foreign aid. However, the bank said that “the private sector revival required for a virtuous cycle of growth has not been realized due to the continued restrictions on movement and access.” The World Bank initially said double-digit economic growth is possible, provided Israel, the Palestinian government and the donors do their part and the blockade of Gaza is lifted. However, the Gross Domestic Product in the Palestinian areas - currently at about $4 billion - is only expected to grow by 3 percent in 2008, accord to the revised prediction. “That, taking into account population growth, leaves per capita income static, if not lower than the previous year,” the report said. The bank said 2007 ended with zero economic growth, which translated into a drop in income because of population growth. Since its 1999 peak, the per capita GDP declined by nearly 40 percent. The bank noted that the Gaza economy has sharply contracted because of the near-complete closure of the territory by Israel and Egypt after the violent Hamas takeover there last year. However, even in the West Bank, economic growth was only modest, the bank said. The Palestinian reform and development is largely implemented in the West Bank, though Gaza does see some of the foreign aid, in the form of salaries paid to thousands of civil servants there. On Friday, the International Monetary Fund said the Palestinian government in the West Bank has made “significant strides” toward reducing its huge budget deficit of 27 percent of the GDP, but that international donors need to transfer an additional $400 million to close the spending gap in 2008. Israeli government spokesman Mark Regev said Israel is working closely with the donor community, and that it is in Israel's interest to see the Palestinian economy recover. However, he said Palestinian militants continue to pose a threat, and that a hasty removal of roadblocks, if followed by attacks on Israel, could set back peace efforts. “We are ready for calculated risks. We are not ready for irresponsible risks,” he said. “We will continue to work with the Palestinians and the international community in taking down roadblocks.” Since the outbreak of Israeli-Palestinian fighting in 2000, Israel has covered the West Bank with a network of hundreds of checkpoints, gates and earthen barriers. Israel says the barriers are meant to restrain Palestinian militants from entering Israel. In recent weeks, Israel removed some obstacles to movement in the West Bank, mainly dirt mounds. However, the report, citing UN figures, said in March that the overall number of obstacles had increased. – AP. __
