The World Bank warned on Monday that continued economic growth in the occupied West Bank would depend on Israel taking further steps to lift restrictions on movement.
Israeli border guards check Palestinian women?s IDs as they head to Jerusalem at a checkpoint in Bethlehem, 2009.(AFP)
"The fiscal position of the (Palestinian Authority) remains precarious. Despite evidence of economic growth in the West Bank, its sustainability remains in question," the Bank said ahead of a donors conference in Madrid.
The warning came a day after the International Monetary Fund said the West Bank economy grew 8.5 percent in 2009 following Palestinian reforms, the easing of some restrictions, and nearly two billion dollars of foreign aid.
Both bodies have cautioned that those gains could be in danger if Israel does not remove more of the hundreds of roadblocks and checkpoints it maintains in the West Bank, which it says are necessary for security.
The World Bank recommended "that continued easing of the economic restrictions on the West Bank, and lifting the Gaza blockade, remain a top priority for the government of Israel.
"Specifically, it urges unlocking of the economic potential of Area C in the West Bank," it said, referring to the more than 60 percent of the territory that is under complete Israeli civil and military control.
It also urged the "liberalising of economic linkages with east Jerusalem," which Israel seized in the 1967 Six Day War and annexed in a move not recognised internationally, and which the Palestinians view as their capital.
Both the World Bank and the IMF called for the lifting of sanctions on Gaza imposed after the Islamist Hamas movement seized power in June 2007, which have crippled the private sector and spawned an informal smuggling economy based on tunnels beneath the Gaza-Egypt border.
"All parties must bear in mind that economic integration of the West Bank and Gaza is critical to the viability of a Palestinian state in the medium and long terms," World Bank regional vice president Shamshad Akhtar said.
"The current political and security uncertainty, as well as the movement restrictions, pose substantial impediments to the necessary integration of the Palestinian economy within the Middle East as well as globally."