Lack of peaceful resolution with Israel: economic cost for Palestinians

We propose to estimate the economic cost for Palestine and for Palestinian residents due to the lack of peaceful resolution with Israel. Thereto we make use of the consensus estimates of the International Monetary Fund (IMF) and the World Bank (WB) of real growth rates of economic variables and of the nominal national accounts for Palestine over the period 1994-2006. We identify four periods: 1994-1999 with high real growth rates of gross domestic product (GDP) and of gross national income (GNI); 2000-2002 with a strong decline; 2003-2005 with a modest growth; and 2006 with a renewed decline. We derive the real national accounts (prices1999) for the end years: 1999, 2002 and 2005. It follows that over 2000-2002 the real GDP declined by 27.5%; GNI by almost one third; but that real gross disposable income (GDI) “only” declined by 11.3%; and that over 2000-2005 the declines were 13.8% (GDP) ; about 20%(GNI); and 2.9% (GDI), respectively. Consequently, in 2005, the year preceding the renewed isolation of Palestine, real GDP, GNI and GDI were still below their 1999 level. Based on the modest growth scenario of IMF and WB (3% real growth and 3% price increase) we estimate that over the period 2000-2002 the cost for Palestine, measured in terms of nominal GNI, was equal to the GNI of 1999 (5.5 billion US$), and over 2000-2005 to two-and-a-half times the 1999 GNI. Based on the same growth scenario, we estimate the loss for a Palestinian resident, measured in terms of nominal GDI per capita, to be 30% of the 1999 level by the end of 2002 and 25% by the end of 2005.