COVID-19, the Palestinian Economy, and Growing Inequalities

14, Apr 2020
COVID-19, the Palestinian Economy, and Growing Inequalities

Over the past few months, the emergence of the novel COVID-19 (coronavirus) has rapidly transformed the social and economic landscape across the globe. With country-wide quarantines and shutdowns, the virus has all but caused the global economy to hit a standstill, furthering the economic and social divide in both the developing and the developed world.


What began as an outbreak in the Chinese city of Wuhan, in December 2019, has since spread to become a global pandemic on an unprecedented scale. The spread of the virus has revealed that the interconnectivity of commerce and markets cannot be underplayed, and makes the case for the pervasive nature of globalization, as it has affected virtually every country and economy around the world.


COVID-19 and the Global Economy

Since the start of 2020, more than two million cases of COVID-19 have been reported reported, over 100,000 deaths, and rising. With no end in sight and country-wide lockdowns set in motion, global financial markets have plunged to all-time lows. According to Statista, in Asia, the Shanghai Stock Exchange Composite Index and the Nikkei Stock Average index significantly dropped. While in the United States, the Dow Jones Industrial Average Index experienced some of its most significant single-day gains and losses of all time, with the S&P 500 index and Nasdaq Composite index similarly affected by volatile market activity. Moving on to Europe, the Financial Times Stock Exchange 100 index has reportedly had its steepest fall since 1987. 


And the Middle East was hit just as hard as the rest of the world, the IMF reports, that in addition to plummeting oil stocks by over 50 percent, due to travel restrictions and a significant decrease in demand for oil, “a drop in domestic and external demand, a reduction in trade, disruption of production, a fall in consumer confidence, and tightening of financial conditions” is sweeping the region. 


The results translate into devastating levels of unemployment that have already reached a staggering 190 million worldwide. This number reveals that across the Middle East, massive reductions are underway with approximately 8.1 percent, or five million full-time workers expected to lose their jobs. In Europe, this translates into 7.8 percent, 12 million full-time workers, and across Asia and the Pacific, a staggering 7.2 percent, 125 million full-time workers will be left in the dust.


It is also important to note that these numbers don’t even scratch the surface of the losses within the informal sector, which employs an estimated 2 billion people or 60 percent of the world’s employed population.


Palestine, Covid-19, and Growing Inequalities

The effects of COVID-19 have shaken the global economy as we know it. It is safe to say that most, if not all, countries have been impacted by nationwide lockdowns, restrictions on movements, and self-isolation measures that have been imposed on a massive scale. Although these measures are nothing new to Palestinians who must regularly contend with externally imposed restrictions that affect every aspect of their daily lives, the ripple effect of global market shutdowns has hit the country hard. According to official reports, over 350 across the West Bank have contracted the virus, and no news on Gaza. However due to the lack test kits, it is difficult to fully understand the effects of COVID-19 on the health and lives of thousands of Palestinians. 


It cannot be stressed enough that Palestine has one of the highest unemployment rates in the world, which as of 2018, is at a staggering 31 percent. This breaks down to 18 percent in the West Bank and 52 percent in Gaza. And as growing unemployment rates continue to dominate the Palestinian economic landscape, poverty has reached an all-time high at 29.2 percent.


The underlying causes, political turmoil on the local and regional level, strict restrictions over the movement of people and goods, and a crippling lack of control over borders, are just a few of the factors that have come to dominate the Palestinian political economy over the decades.


The emergence of COVID-19 into the Palestinian landscape has not only revealed inherent disparities and inequalities but has intensified them. Prior to the outbreak and subsequent lockdown, the Palestinian GDP was at 14.6 billion, with an annual growth rate of 2.2 in 12 months. However, Raja Khalidi, director-general of the Palestine Economic Policy Research Institute (MAS), compares the potential effects of COVID-19 on the Palestinian economy, to the 40 percent drop of the country’s GDP back in 2002, as a result of a  series of closures and political instability, and turmoil, across the West Bank and Gaza, which took years before things returned to any semblance of normalcy. Moreover, while limited donor aid continues to flow into the country, with the projected economic downturn and loss of jobs, more needs to be done to mitigate the effects of the pandemic.


To address these concerns, Prime Minister Dr. Mohammad Shtayyeh announced that public finances are on the brink of a financial disaster as experts estimate that the decline in Treasury revenues may reach 50 to 70 percent, ultimately costing the country 300 to 400 million Shekels. He further stated that Palestinian revenues have shrunk by half, in light of the current financial crises, forcing many if not all government workers to go without a full salary during these trying times. As a result, the Palestinian Authority’s budget deficit is projected to increase from 0.8bn USD to 1.8bn and 2.4bn USD.


Varying effects of Covid-19 on the Palestinian Worker, Employee, and Family

The PCBS reports that 52.7 percent of all Palestinian wage employees are within the private sector, 30.5 percent in the public sector, and 16.8 percent working in Israel and Israeli Settlements. To focus more on the private sector, the Palestine Monetary Authority (PMA) reports that MSMEs make up nearly 99 percent of the Palestinian economy while employing 80 percent of the country’s private-sector labor force. Further, the same report indicates that 80 percent of MSMEs are dependent on the personal saving of their owners to maintain operations.


MSMEs have proven time and again to be the backbone of the Palestinian economy, prolonged closures and curfews have put a severe strain on these businesses, leaving many at risk of bankruptcy and permanent closure. Ultimately, thousands of Palestinians are at risk of losing their jobs as a result of this dire situation.


The situation for nearly 150,000 Palestinian workers in Israel is another issue. It is reported that these workers bring in 2.5bn USD to the economy each year, and the loss of this will negatively impact the local Palestinian market economy, by putting a curb on consumer demand and spending. While many employees in the public and private sector have the option of working from home, with a portion of their salary secured, Palestinian workers in Israel have been completely cut-off from their livelihood, putting some of the most marginalized families at further risk of impoverishment. As such, Palestinian officials have announced that workers returning from Israel are responsible for approximately a third of registered cases in the West Bank.


And the health sector is putting a priority on the most vulnerable communities likely to become virus hotspots. OCHA reports that people living in densely populated areas, overcrowded refugee camps, and underdeveloped communities, are more susceptible to contracting the virus due to ineffectual sanitation systems, water scarcity, poor healthcare coverage, and lack of access to cities.  


The inequalities do not end there. While COVID-19 has been responsible for putting the country’s economy in a standstill, the education sector is still moving ahead with virtual classrooms, which have quickly become the new norm for thousands of young Palestinians.


However, marginalized students have been hit the hardest, lacking access to the technology or family support needed to keep up with their studies. As such, many may miss out on the rest of the school year. The capacity of the education sector to address students' needs is tenuous at best. With resources already spread thin, without proper policies or contingency plans in place, thousands of students are at risk of falling through cracks in the system.  


Looking beyond COVID-19

Amidst a landscape of global economic downturn and uncertainty, which could take years to bounce back from, the people of Palestine must tap into their collective resilience and industriousness to make it through tough the times ahead. With thousands of jobs potentially lost, workers with no way to earn a livelihood, the public and private sector must work together to address these issues to implement policies and measures that will support the perseverance of the most vulnerable.


Ultimately, while COVID-19 continues to cripple the global economy and industry, in Palestine, the virus has not only revealed inherent inequalities but deepened them. Stakeholders across the public and private sector, as well as policymakers, development organizations, and the donor community, have the power to make a change and advocate for policies that will systematically address and bridge these gaps to create a more equitable future for all.