UN Report: Israel's Gaza War & Restrictions Cause Record Palestinian Economic Collapse, Erasing Decades of Progress

Palestinian Economy Faces Record Collapse Amid Gaza War and Restrictions

The economy of the occupied Palestinian territory is currently experiencing its most severe downturn in recorded history, a crisis directly linked to the extensive scale of Israel's military campaign in Gaza and ongoing stringent restrictions on movement and trade. A new United Nations report by the UN Conference on Trade and Development (UNCTAD), published recently, highlights the dire situation.

A Collapse of Unprecedented Scale

According to the UNCTAD findings, two years of Israeli military operations and persistent curbs have plunged the occupied territories into an economic freefall, ranking it among the ten worst global collapses recorded since 1960. The report unequivocally states that "Extensive damage to infrastructure, productive assets and public services has reversed decades of socioeconomic progress in the Occupied Palestinian Territory," encompassing both the Gaza Strip and the West Bank, including East Jerusalem. Gaza, in particular, is grappling with "the most severe economic crisis on record."

This stark assessment comes amid ongoing Israeli attacks on Gaza, despite a recent six-week ceasefire. The current conflict escalated following an October 7, 2023, attack by Hamas and other Palestinian groups, which resulted in an estimated 1,139 deaths and approximately 240 captives taken into Gaza. In response, Israel initiated a massive bombing campaign and intensified its already 16-year-long blockade on Gaza, transforming it into a complete stranglehold. These actions have tragically led to at least 69,733 deaths and 170,863 injuries, with over 300 fatalities recorded even since the ceasefire commenced.

Erasing Decades of Progress: The Economic Fallout

The UNCTAD report details a staggering regression in the Palestinian economy. By the end of last year, the Palestinian gross domestic product (GDP) had reverted to its 2010 level. GDP per capita plummeted even further, returning to 2003 levels, effectively wiping out 22 years of development in under two years.

Gaza has borne the brunt of this economic devastation. Its GDP plunged by an alarming 83 percent in 2024 compared to the previous year, culminating in an 87 percent drop over two years to a mere $362 million. GDP per capita in Gaza now stands at a startling $161, placing it among the lowest globally. The report attributes this to nearly two decades of Israeli-imposed blocks on trade, movement, and access, which have fostered almost total reliance on external aid. Furthermore, Israeli attacks have severely damaged approximately 174,500 structures in Gaza, pushing the enclave into a state of "utter ruin."

The occupied West Bank is not immune, also experiencing its most severe economic downturn on record, exacerbated by movement and access restrictions and widespread job losses. The report emphasizes, "Across the Occupied Palestinian Territory, the steepest economic contraction on record has wiped out decades of progress."

Fiscal Challenges and the Path to Recovery

Compounding the crisis, Israel's withholding of fiscal revenues owed to the Palestinian Authority (PA) has significantly worsened the situation. This act severely curtails the PA's ability to pay salaries, maintain essential public services, and finance much-needed reconstruction efforts. The PA recently announced that Israel is currently withholding $4 billion in tax revenues.

UNCTAD estimates that the cost of reconstruction and recovery in Gaza alone will exceed $70 billion. The agency has issued an urgent call for a comprehensive recovery plan, advocating for coordinated international assistance, the immediate restoration of fiscal transfers, and crucial measures to ease constraints on trade, movement, and investment. The report warns grimly that "Even with substantial aid, recovery to pre-October 2023 GDP levels could take decades."

Without immediate, large-scale intervention, the destruction inflicted by Israel's war and systemic restrictions threatens to entrench the Palestinian economy in a prolonged slump. For any meaningful recovery to occur, UNCTAD stresses the critical need for the ceasefire achieved in October to be made durable. The report concludes with a plea to the international community for "immediate and substantial intervention... to halt the economic freefall, address the humanitarian crisis, and lay the groundwork for lasting peace and development."