The report details the profound economic destruction that has gripped the Occupied Palestinian Territory in the aftermath of the Israeli military operation in Gaza that followed the 7 October 2023 attacks by Hamas.
The staggering scale of economic devastation and unprecedented decline in economic activity far surpasses the impact of all previous military confrontations in 2008, 2012, 2014 and 2021.
Economic collapse in Gaza
The military operation led to unprecedented loss of life, displacement and widespread destruction of infrastructure.
- By early 2024, between 80% to 96% of Gaza's agricultural assets had been decimated, including irrigation systems, livestock farms, orchards, machinery and storage facilities. This has crippled the region's food production capacity and worsened already high levels of food insecurity.
- The destruction also hit the private sector hard, with 82% of businesses, a key driver of Gaza’s economy, damaged or destroyed.
- Gaza's Gross Domestic Product (GDP) plummeted by 81% in the last quarter of 2023, leading to a 22% contraction for the entire year. By mid-2024 Gaza's economy had shrunk to less than one-sixth of its 2022 level.
Destruction extends to the West Bank and East Jerusalem
The West Bank has been undergoing a rapid and alarming economic decline. The report highlights factors such as settlement expansion, land confiscations, demolition of Palestinian structures and increased settler violence.
- About 80% of businesses in the East Jerusalem Old City have either partially or completely ceased operations.
- The initial optimism of a 4% GDP growth in the West Bank during the first three quarters of 2023 was abruptly reversed by an unprecedented 19% contraction in the fourth quarter. This sharp downturn resulted in an overall annual GDP decline of 1.9%.
Surging poverty and unemployment hit Gaza and the West Bank
The conflict has led to significant job losses, severely eroding the economic resilience of Palestinian households and exacerbating social hardships.
- In Gaza, two-thirds of pre-war jobs—about 201,000 positions—were lost by January 2024.
- In the West Bank, a total of 306,000 jobs have been lost, pushing unemployment rates from 12.9% before the conflict to 32%. These job losses have resulted in an estimated daily labor income loss of $25.5 million,
- By 2022, one-third of the Palestinian population (1.84 million people) was food insecure (lacking consistent access to sufficient and nutritious food) or severely food insecure.
- Before October 2023, 80% of Gaza’s population depended on international assistance. Currently, poverty affects nearly the entire population of Gaza and is rising rapidly in the West Bank.
Revenue cuts and reduced aid cripple the Palestinian government
The Palestinian government's fiscal capacity has been eroded by slow GDP growth, revenue deductions by Israel and a sharp decline in international aid.
- In 2023, international donor support fell to its lowest level at $358 million equivalent to just 2% of GDP, down from $2 billion, or 27% of GDP in 2008.
- Since October 2023, revenue deductions and withholdings by Israel have escalated totaling over $1.4 billion between 2019 and April 2024. This amount represents 8.1% of Palestine's GDP in 2023, leading to significant budgetary shortfalls.
These fiscal challenges have hampered the government's ability to pay employees, service debts and maintain critical public services such as healthcare and education.
Immediate international intervention needed to stabilize the economy and support peace efforts
UNCTAD stresses that prolonged occupation remains the main obstacle to sustainable economic development.
It calls for immediate and substantial intervention by the international community to halt the economic freefall, address the humanitarian crisis and lay the groundwork for lasting peace and development. This includes considering a comprehensive recovery plan for the Occupied Palestinian Territory, increased international aid and support, release of withheld revenues and lifting the blockade on Gaza.
The Weekly Tradecast looks at the devastating impact of the Israel-Gaza war on the Palestinian economy with Rami Alazzeh, an expert in conflict and development economics at UN Trade and Development (UNCTAD).
