JERUSALEM (AFP) — White House hopeful Mitt Romney raised Palestinian hackles for the second time in 24 hours yesterday with a remark ascribing their economic gap with Israel to "culture."

"I was thinking this morning as I prepared to come into this room of a discussion I had across the country in the United States about my perceptions about differences between countries," he told well-heeled Jewish donors at what Israeli media said was a $50,000 per couple fundraising breakfast.

"As you come here and you see the GDP per capita for instance in Israel which is about $21,000 and you compare that with the GDP per capita just across the areas managed by the Palestinian Authority which is more like $10,000 per capita you notice a dramatic, stark difference in economic vitality," he went on.

Respected international bodies including the World Bank and the IMF say that a major factor behind Palestinian economic woes is the Israeli restrictions on movement of goods and people, and other measures that choke growth.

But Romney made no mention of such issues.

"Culture makes all the difference," he told the Jerusalem audience before leaving for Poland.

"As I come here and I look out over this city and consider the accomplishments of the people of this nation, I recognise the power of at least culture and a few other things."

Palestinian negotiator Saeb Erakat said the remark was racist.

"Romney's statements are racist and this guy needs to learn a lot, as he lacks knowledge of this region, its culture and history," he told AFP. "Clearly he does not know that the Palestinian economy cannot reach its expected level if the occupation continues."

On Sunday, Romney outraged the Palestinians by hailing Jerusalem as Israel's capital.

"It is a deeply moving experience to be in Jerusalem, the capital of Israel," he said, in an apparent endorsement of a position held by the Jewish state but never accepted by the international community.

The Palestinians, who claim Israeli-annexed east Jerusalem as the capital of a future state were infuriated.

"Hamas considers the statement made by Republican presidential candidate Mitt Romney, saying Jerusalem is the capital of Israel, racist and extremist," the Islamic militant group's spokesman Sami Abu Zukhri said yesterday.