A report released Thursday [September 12, 2013] by the International Monetary Fund (IMF) on the economic situation in the West Bank and Gaza says that worrying trends have continued despite the optimism of renewed peace negotiations.Those recent “worrisome trends” include “slowing growth, high unemployment, and large fiscal deficits.”

The report states that if the status quo is maintained, “economic prospects are dim”, and it questions the viability of the West Bank and Gaza’s public finances “if the current model of financing persistently large deficits with unpredictable aid flows is maintained.”

The IMF report recommends that the authorities reduce the fiscal deficit “significantly” over time, and that government spending be made more “growth-friendly.”

Furthermore, the report contends that “the economy would benefit from increased donor aid during a transitional period, and a broad-based and sustained easing of restrictions, not linked to specific projects, by Israel.”

According to the IMF, real GDP growth dropped from 11 percent in 2010-11 to 5.9 percent in 2012, and economic activity was undermined by “broadly unchanged Israeli restrictions in 2012 and political uncertainty.” Alarmingly, real GDP growth sank to 2.7 percent in the first quarter of 2013.

High unemployment is also a major concern. In the second quarter of 2013, the unemployment rates in the West Bank and Gaza were 17 percent and 28 percent, respectively. Meanwhile, youth employment in the West Bank and Gaza “has reached a staggering 33 percent.”

The IMF predicts a “challenging” near-term outlook wherein weak growth will cause unemployment to rise further.