comparable period of 2009 was so poor, due in part to the Israel-Hamas war that ended in January 2009.

"It's starting from a very low base after a very tight blockade," said Oussama Kanaan, the IMF representative in the West Bank and Gaza.

The assistance of international organizations, which launched various projects in Gaza during the first half of 2010, also contributed to the Strip's economic growth, the report said.

In the West Bank, the main drivers of growth were the financial reforms introduced by the Palestinian Authority and Israel's significant relaxation of restrictions on freedom of movement.

Nevertheless, the report said, Gaza's unemployment rate remains above 35 percent, and its per capita income is still only 60 percent of what it was in 1994, immediately after the Oslo Accords were signed.Moreover, it warned, the present rate of growth is unsustainable unless Israel removes its restrictions on exports from the Strip and on imports by Gaza's private sector.

In the West Bank, it added, growth will slow unless Israel removes restrictions on exports from the West Bank to Israel and East Jerusalem, and eases movement restrictions on Palestinian traffic in Area C, the approximately 60 percent of the West Bank that is under full Israeli control.

The IMF praised the PA for improving tax collection in the West Bank, thereby increasing its own revenues, while also cutting and sensibly prioritizing expenditures. These factors combined to lower the PA's deficit, which is covered by foreign donations, from $1.8 billion in 2008 to $1.2 billion this year.

However, the fact that several donor countries