Occupation and war: Palestinian economy suffers worst collapse

For nearly two decades, 2.3mn Palestinians in Gaza have faced severe constraints on trade, movement and access to resources within one of the most densely populated areas on the earth.

Limited entry of goods, combined with Israeli restrictions on productive inputs, equipment, and technology, and recurrent military operations, have dismantled Gaza’s productive base and created near total dependence on external assistance.

The two-year war and economic restrictions in the Israeli-occupied West Bank have triggered the worst collapse in the Palestinian economy on record, wiping out decades of growth, according to a United Nations report last week.

The Palestinian economy across the West Bank and Gaza contracted by 30% in 2024 compared with 2022 - the benchmark being used to measure the impact of the two-year Israel-Hamas war, the report by the UN Trade and Development agency (UNCTAD) said.

That is the steepest fall since data collection began in 1972, exceeding previous economic downturns during the many conflicts since then including the Second Intifada after the failure of peace talks in 2000, the report said.

"What we see today is extremely worrying. The prolonged military operation, combined with long-standing restrictions, has pushed the economy of the occupied Palestinian territory into its deepest decline on record,” UNCTAD Deputy Secretary-General Pedro Manuel Moreno said.

GDP per capita has returned to that of 2003, erasing 22 years of development progress, the report said, describing the crisis as among the 10 worst globally since 1960.

"It will take decades for Gaza to produce more than it used to produce prior to the conflict and in order to recover fully. And that’s, of course, if all conditions go in the right direction,” said UNCTAD Economist Rami al-Azzeh.

A ceasefire deal took effect on October 10 in Gaza but Israeli airstrikes have continued, aid has been slow to arrive and conditions in Gaza remain dire. Per capita GDP in Gaza amounts to $161 a year or around 44 cents per person a day, al-Azzeh said, describing it as the lowest level anywhere in the world.

The West Bank is also suffering its most severe downturn on record, driven by movement and access restrictions and the loss of economic opportunities. Worsening settler violence against Palestinians in the West Bank is blocking farmers from accessing their crops and animals.

Israel’s restrictions and rising fiscal constraints in the Palestinian territories had been severely impacting the economic conditions of Palestinians and hindering their access to timely life-saving healthcare, according a World Bank report in 2023.

The fiscal situation deteriorated sharply after October 2023, making 2024 one of the most challenging years for the Palestinian Government, according to the latest UNCTAD report.

Revenue shortfalls, the withholding of fiscal transfers, a contracting economy and declining external support, have deepened the crisis. Fiscal pressures persisted through 2025, straining the Government’s ability to maintain essential services and macroeconomic stability.

Between January 2019 and April 2025, cumulative fiscal deductions and withheld revenues amounted to an estimated $1.76bn – equivalent to 12.8% of GDP in 2024 and 44% of total net revenues.

The estimated cost of reconstruction and recovery in Gaza exceeds $70bn, underscoring the magnitude of investment required to rebuild infrastructure and restore livelihoods.

The scale of the damage in Gaza after the two-year war between Israel and Hamas means the enclave will be reliant on extensive international support and recovery could still take decades.

UNCTAD’s report 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.

Palestinian economy is in urgent need of a comprehensive recovery plan with co-ordinated international assistance, restoration of fiscal transfers, and measures to ease constraints on trade, movement and investment.