JERUSALEM,  – The Palestinian Territories’ economy is showing “signs of recovery” but still faces serious challenges including “very high unemployment and deteriorating social conditions” in Gaza, the World Bank said Tuesday.

In the first half of 2021, growth reached 5.4 percent, and is expected to reach 6 percent this year, the World Bank said in a report. However, growth in 2022 is predicted to slow to around 3 percent, it added.

“The way ahead is still uncertain,” said Kanthan Shankar, World Bank Country Director for the West Bank and Gaza, adding that progress “depends on coordinated actions by all parties in revitalising the economy and providing job opportunities for the young population”.

The Gaza Strip was hit hard during 11-days of devastating conflict with Israel in May, while the economy was also impacted by restrictions imposed to stem the spread of coronavirus. In Gaza, a Palestinian enclave of two million people controlled by the Islamist Hamas, unemployment stands at 45 percent, while the poverty rate has risen to 59 percent from 43 percent five years ago.

“The dire living conditions and the high dependency on social assistance of the people of Gaza is of particular concern,” Shankar said. In the occupied West Bank, the unemployment rate is around 17 percent, the World Bank calculates, saying the “Palestinian Authority’s fiscal situation remains very challenging” and warning it was “no longer able to borrow from domestic banks”.

The PA’s deficit is expected to reach $1.36 billion in 2021, it added. The World Bank called on donors “to help reduce the budget deficit”, and for the “systematic transfer” of revenues Israel raises from businesses operating in the so-called Area C of the West Bank, where Israel holds full control under the 1995 Oslo Accords. “Releasing some of these funds would provide much needed quick financing in these difficult times,” it added.