BETHLEHEM (Ma'an) -- The Palestinian economy is facing serious risks, with a slowdown in growth and rise in unemployment in both Gaza and the West Bank, the International Monetary Fund said Thursday. 

A new report says the West Bank’s real GDP grew by an annual average rate of 9 percent, but growth declined to 5 percent in 2011 and the first quarter of 2012, while unemployment rose to 19 percent in the first half of 2012 from 16 percent in the same period last year. 

"The economic slowdown reflects continued fiscal retrenchment combined with severe financing difficulties, declining donor aid especially from regional donors, and slower easing of restrictions on movement and access," the report said. 

In Gaza, after a rebound in its real output by over 20 percent on average in 2010–11 following the easing of tight restrictions, growth has declined to 6 percent in the first quarter of 2012, and unemployment has risen to 30 percent from 28 percent in the same period last year. 

With persisting restrictions, financing difficulties with aid shortfalls, and stalemate in the peace process, "there is a high risk of a continued economic slowdown, a rise in unemployment, and social upheaval," the report said.

World Bank 

On Wednesday the World Bank warned of a deepening fiscal crisis in the Palestinian economy in its latest report, urging donors to act immediately.

The twice yearly document, prepared to inform a PA donor meeting in late September, stresses that sustainable growth can only be driven by strong private sector investment and access to Area C is vital to enabling private sector growth.

"Donors do need to act urgently in the face of a serious fiscal crisis facing the PA in the short term," said Mariam Sherman, World Bank Country Director for the West Bank and Gaza.

"But even with this financial support, sustainable economic growth cannot be achieved without a removal of the barriers preventing private sector development, particularly in Area C."

The report notes that Area C, the 60 percent of the West Bank under full Israeli control, holds most of the natural resources, agricultural land, and land reserves in the West Bank.

Access to these resources could play a significant role in providing an economic foundation in the development of industries such as construction, telecommunications, agriculture and tourism, the report says.