The course of the Palestinian economy since the Second Intifadah has left per capita GDP in 2006 ($1,130) at 40% less than in 1999, and has altered an already-fragile economy from one driven by investment and private sector productivity, to one sustained by government and private consumption, and donor aid. Reversing this downward cycle requires parallel actions by the Palestinian Authority (PA), Israel and the donors. Reform and development of the Palestinian economy and its institutions must proceed immediately. To succeed, these reforms must be implemented with determination by the PA, underwritten by donors and supported by Israeli actions. In the same vein, Israeli policies that impact the Palestinian economy and Palestinian actions on security to reinforce these policies must proceed in parallel. The PA’s Palestinian Reform and Development Plan (PRDP) for 2008-10 represents a process around which the PA, Israel and the donor community can coalesce. The PRDP is an important document that envisions a sequence of steps centering on control of expenditures with medium-term reforms across sectors to bring the PA back to financial sustainability. In addition, the PRDP is a promising effort by the PA to link policy-making, planning and budgeting, and to deliver a Palestinian-owned plan for allocating resources. The PRDP is regarded as succeeding insofar as it is addressing the entirety of the Palestinian population. The Gaza Strip represents about 40% of the population, and an essential part of the Palestinian territory and economy. Any effort at economic recovery and development must address the impacts of the current closure regime and the aftermath of the illegal takeover of Gaza. The continued entry of humanitarian goods has mitigated the impact of the closures on Gaza’s population, but has not been sufficient to offset the collapse of the private sector there.