It's really gloomy, and I think it's accurate. I don't think the UNCTAD is lying.
From the report:
13. Despite the repeated withholding of Palestinian clearance revenue (see paragraph 16) by Israel since 1994, the heavy fiscal cost of occupation and the reorientation of public expenditure to meet emergency and humanitarian needs, PNA has managed to consistently narrow the deficit-to-GDP ratio.
This suggests that its fiscal management is relatively sound and that the chronic fiscal crisis is mainly caused by occupation. However, this is not recognized by PNA development partners, who continue to implicitly, and at times explicitly, suggest that PNA reforms alone can achieve fiscal sustainability.
14. UNCTAD analysis of the Palestinian fiscal crisis continues to set the agenda of the
Palestinian economic policy discourse. Pioneering research on Palestinian fiscal leakage to
Israel by UNCTAD (2011a; 2012; 2014a) has been most recently cited by the International
Monetary Fund (2016), Office of the Quartet Representative (2016) and World Bank
(2016a). These three agencies formed a task force to study this problem and facilitate a
resolution. UNCTAD work also led to the commencement of negotiations between Israel
and PNA on this problem. An agreement was reached whereby Israel will transfer
$128 million to cover some of the losses accumulated over the years by the Authority.
Furthermore, the Palestinian fiscal leakage was a prominent topic at the April 2016 meeting
of the Ad Hoc Liaison Committee (see http://www.lacs.ps/article.aspx?id=6), and its chair’s
summary emphasized the great potential in Israel and PNA closing fiscal leakages and
addressing revenue losses under the current arrangements (Ad Hoc Liaison Committee,
2016).
15.
The combination of stricter occupation and declining donor aid constrain economic
growth and may roll back PNA achievements in building the institutions required for a
well-functioning economy to underpin a viable future State. Fiscal compression, under
conditions of worsening occupation, necessitated by declining donor aid, could lead to
painful and unpredictable consequences.
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