Palestinian Economy Experiences Worst Crises in Modern History

The Palestinian economy is experiencing one of the worst crises in its modern history. 

The recent, intensified war was not only a humanitarian tragedy but also a devastating economic blow, leaving repercussions on every home and wallet.

Unemployment and poverty rates have risen shockingly, and the economic downturn has surpassed the levels of previous wars. Palestinians face an uncertain future that will require years for recovery, if it ever materializes.

Since the outbreak of the latest conflict in October 2023, the situation in the Palestinian territories has deteriorated at an unprecedented rate, with more than 50,000 deaths and 113,000 injuries by March 2025. The latest conflict was estimated to be more severe than the recession during the Second Intifada (2000), the 2014 war, and the COVID-19 pandemic, according to a World Bank report in April 2025.

Despite a temporary truce reached in early 2025, its collapse in March brought the situation back to square one, exacerbating the economic and humanitarian crisis.

Palestine's GDP declined by 27% in 2024, the largest decline in 30 years. Gaza's economy collapsed by 83%, while the West Bank's economy shrank by 17% due to restrictions on movement and job losses.

The labor market is in a dire crisis; unemployment in Gaza reached 80% by the end of 2024, and doubled in the West Bank to 29%. Nearly 90% of Gaza's industrial and service sector workers lost their jobs.

Poverty is shockingly widespread, with poverty rates rising from 29% in 2023 to nearly 40% by the end of 2024, with Gazans almost entirely dependent on food aid.

Food prices have multiplied 100-fold, and inflation has reached exponential rates. Consumer price inflation in Gaza exceeded 230% in 2024, driven by supply shortages, especially after the end of the truce and the closure of the crossings.

The deficit in 2024 reached $1.3 billion (9.5% of GDP), an unprecedented figure for the Palestinian Authority, compared to 3.8% in 2023. Clearance transfers from Israel declined by more than 50%, forcing the PA to cut employee salaries by 60%-70%.

The health system is on the verge of collapse. Half of Gaza's hospitals are out of service, amid the spread of serious diseases such as polio, and severe shortages of medicine and water.

As for the comprehensive education crisis, approximately 745,000 students in Gaza have been out of school for more than a year, and 95% of educational facilities have been damaged or destroyed. In the West Bank, school days have been reduced to two days per week due to the financial deficit.

As for banks, they are resilient but at risk. Palestinian banks still maintain reasonable liquidity, but loan losses have increased, and 98% of Gaza's banking infrastructure has been damaged.

Digital transformation is considered a last resort. E-wallets, used by more than half a million Palestinians in Gaza, have helped alleviate the liquidity crisis, and electronic transfers via the Buraq system have increased to over 480,000 transactions in the last quarter of 2024.

It is worth noting that women are the most economically affected; more than half of women-owned businesses in Gaza and the West Bank have recorded a sharp decline in performance, and 62% of female entrepreneurs have reduced their workforce.

Reconstruction needs have exceeded three times the gross domestic product. The World Bank, the United Nations, and the European Union have estimated the total cost of reconstruction at approximately $53.2 billion, including $20 billion in urgent funding over three years. The housing sector alone has suffered damages of $15.8 billion.

According to World Bank estimates, Gaza will not return to pre-crisis income levels until 2038, while the West Bank may recover by 2028. What the Palestinian territories are experiencing is not just an economic recession, but a near-total collapse of the foundations of statehood and society.

While ending the conflict remains the top priority to salvage what can be salvaged, addressing the financial gap, stimulating the private sector, and repairing infrastructure will require massive international efforts and a long-term roadmap to restore hope to a wounded economy and an exhausted people struggling and resisting.