Packs of pilgrims assembled on the plaza outside the fortress walls of the Church of the Nativity in Bethlehem are being harangued with holy history by polyglot guides as shopkeepers and cafe owners in Manger Square lift their shutters in anticipation of another disappointing day’s business.

Nabil Giacaman of Christmas House on the square says he sold only $25 in handcrafts the previous day. The shop is filled with rosaries, boxes, crosses and Christmas scenes carved from olive wood, boxes in mother-of-pearl and jewellery. “Tour buses take groups to shops giving 40 per cent commission,” he states. “We can’t afford such a percentage. We get tourists who come on their own. Most of our business is online.”

Economic hardships suffered by Palestinians are not confined to Bethlehem, but elsewhere the picture is mixed.

Ramallah is a bustling, traffic-snarled city of modest skyscrapers, with thousands of empty flats, cafes, restaurants, shops and office blocks. After consuming the evening Ramadan breakfast after a day of fasting, West Bankers and Palestinian Jerusalemites pour into Ramallah to partake of swinging night life. Palestinian-American businessman Sam Bahour quips, “Ramallah is a bubble. Five-star occupation.”

Merchants’ coffers

Palestinian civil servants and prosperous businesses prop up the economy, fill the merchants’ coffers. Life is expensive. “The priorities for Palestinian families,” asserts Bahour, “are food, housing and education.” Consumerism is rampant. Malls have sprung up in every quarter. “We are resilient,” says Bahour, “but we wake up every morning trying to figure out how to do our jobs.”

They must deal with with Israel, which imports and exports on behalf of the Palestinians and collects taxes and tariffs, as well as the Palestinian Authority.

In East Jerusalem, formally annexed by Israel in 1980, hotels and tourism companies are sustained by pilgrims flooding into the Old City within the white and gold walls built by the Ottoman ruler Suleiman the Magnificent in 1535. A merchant who owns three premises outside the Old City says there has been a decline in business over the past five years. “So far, shops here have not closed.”

Jerusalem is tied directly to Israel’s much larger, thrusting economy.

Shops and street stalls are filled with Israeli fruit and vegetables, Israeli-manufactured goods and clothing. Palestinian citizens of Israel come to buy on the weekends to keep East Jerusalem afloat.

Cheap fruits and vegetables

The West Bank towns Of Nablus and Jenin also depend on Israeli-Palestinian customers who benefit from cheap fruits and vegetables. Jerusalemites build homes and winter in Jericho in the Jordan Valley to escape Jerusalem’s cold weather.

Gaza is in severe recession. Per capita income has stagnated, and there has been a substantial drop in private investment, the World Bank reports. Only 10 per cent of its two million residents has access to safe drinking water. There is a severe shortage of electricity.

During the decade since Hamas took control of Gaza, there have been two major wars and countless skirmishes with Israel which, a UN official says, have destroyed progress made before 2009. Like Fatah, which ruled Gaza from 1994- 2007, Hamas has been corrupted by power and lost popular support, deepening political and economic insecurity.

While the World Bank and International Monetary Fund (IMF) speak of the “Palestinian economy”, this is misleading. There is no single Palestinian economy, but diverse local economies in isolated West Bank cantons administered by the Palestinian Authority, the 61 per cent of the West Bank ruled directly by Israel, and Gaza.

While national economies in countries across the world also reflect local conditions, the situation in Palestine is magnified by the lack of freedom of movement of people and goods between Palestinian cities, towns and villages, Israeli regulations, and dependence on Israel.

Misleading

The IMF reports the Palestinian economy has grown by 3 per cent annually over the last few years, a rate enviable in the developed world. But this figure is also misleading. Overall unemployment is 27 per cent, 42 per cent in Gaza and 18 per cent in the West Bank. The farming and manufacturing sectors are shrinking. The level of foreign aid has fallen and the Palestinian economy remains a captive market for Israeli goods. Increasing numbers of Palestinians are seeking work in Israel rather than engaging in Palestinian economic activity, promoting development.

The climate of uncertainty deters investors, and the economic gap between Israelis and Palestinians is huge and growing.

The Economist reports Israeli GDP per person is $35,700 (€31,600), the equivalent of that in France. A Palestinian in the West Bank earns $3,700, about the same as an Egyptian, and a Gazan receives $1,700, comparable to a citizen of Congo-Brazzaville. The World Bank and IMF argue the economic situation is unsustainable.