The report on the Palestinian economy, presented to the Donors Conference in London on Tuesday, said further social and economic deterioration was inevitable unless the Palestinian economy is freed from Israel's stranglehold.
The report said up to 37% of the estimated 3.7 million Palestinians living in the West Bank and Gaza Strip had trouble getting food in 2004. Another 27% were at risk of running into such difficulties.
The report, prepared by UN economic experts, pointed out that nearly half the Palestinian population was poor, with poverty rate in the Gaza Strip reaching a staggering 65%.
Up to 16% of Palestinians - 550,000 - were living on $1.5 a day, with the likelihood that the figure will rise to 35% if aid is not forthcoming.
The report spoke of continued Israeli repression, especially in the West Bank where the occupation army maintains tight control in population centres.
Israeli restrictions have brought
miseries for Palestinians
It cited the demolition by Israel of 253 homes and structures in the West Bank over the past 10 months. As many as 5000 Palestinians are living in closed-off areas sandwiched between the separation wall and the former armistice line between Israel proper and the West Bank, the report said.
Israel has reaffirmed its refusal to allow safe passage between the West Bank and Gaza Strip, saying the Palestinian Authority had to fight "terror" first.
Dan Halutz ,the Israeli chief of staff, was quoted by the Ha'aretz newspaper on Wednesday as saying that Israel would not allow bus convoys to move between the West Bank and Gaza for the time being.
Israel had earlier promised to allow Palestinians safe passage between the two regions by the middle of December.
The report's findings are generally supported by an opinion poll published in the occupied territories on Tuesday.
The poll, conducted by the Palestinian Centre for Public Opinion in Beit Sahur and covering a representative sample of 1873 respondents, showed that nearly three quarters of Palestinians were worried about the livelihood of their families.
More than 53% evaluated their economic condition as "bad", while two-thirds agreed that the PA has failed to create job opportunities.
According to Nabil Kukali, who supervised the opinion survey, Palestinian society is experiencing a grave but silent economic and social crisis that he said stemmed from the Israeli occupation.
"There is a conspicuous deterioration of living conditions which underscores the desperate need for international support"
Professor of management at Hebron University
"There is a conspicuous deterioration of living conditions which underscores the desperate need for international support," Kukali told Aljazeera.net.
Kukali, a professor of management at Hebron University, said continued economic deprivation in the occupied territories would eventually lead to anarchy.
Nigel Roberts, the head of the World Bank mission in the Palestinian territories, blamed Israeli restrictions on the movement of people and flow of goods and services for economic stagnation in Palestine.
Roberts, who is taking part in the London conference, told the London-based al-Hayat newspaper that the Palestinian Authority was no longer able to pay the salaries to its civil servants and employees.
Roberts opposed economic separation between the Palestinian territories and Israel, pointing out that 80% to 90% of Palestinian exports went to Israel.