Palestinian economy collapse — this is the alarming assessment delivered by the United Nations Conference on Trade and Development (UNCTAD), which warns that the occupied Palestinian territory is experiencing its most severe economic contraction in recorded history. After two years of relentless Israeli military operations in Gaza and decades of structural restrictions across both Gaza and the West Bank, the Palestinian economy has collapsed to levels not seen in more than two decades.
The new UNCTAD report, published Monday, details the devastating impact of Israel’s war, the blockade on Gaza, and sweeping movement restrictions imposed on millions of Palestinians. According to the agency, the crisis now ranks among the 10 worst economic collapses globally since 1960, underscoring an unprecedented humanitarian and financial catastrophe.
A War-Driven Collapse Unlike Anything Before
The crisis intensified dramatically after the events of October 7, 2023, when Hamas and other Palestinian groups carried out an attack in southern Israel, killing an estimated 1,139 people and taking around 240 captive. Israel’s response transformed Gaza’s already-crippled economy into a zone of total devastation.
Israeli air attacks, ground operations, and the tight blockade have destroyed more than 174,500 structures in Gaza, according to the UN report. These include factories, farms, residential areas, schools, and hospitals — effectively eliminating the productive and social foundations of life in the strip.
As fighting continued despite a six-week ceasefire agreed between Israel and Hamas, the death toll in Gaza soared to at least 69,733 people, with 170,863 wounded, UN figures show. Even under the ceasefire, over 300 people have been killed in Israeli operations.
UNCTAD states plainly: Gaza is now facing “the most severe economic crisis on record.”
GDP Falls to Levels of the Early 2000s
The report paints a grim picture of the Palestinian economy’s structural devastation:
- Palestinian GDP has fallen back to its 2010 level, reversing more than a decade of development.
- GDP per capita has dropped to 2003 levels, effectively erasing 22 years of economic progress.
- In Gaza alone, GDP collapsed 87 percent over the past two years.
- GDP per capita in Gaza now stands at just $161, among the lowest in the world.
These figures illustrate a near-total disintegration of economic activity, leaving households dependent almost entirely on external humanitarian assistance — assistance that is itself collapsing due to access restrictions and destroyed infrastructure.
A Blockade That Paralyzes Trade and Jobs
Gaza’s 16-year blockade, which intensified after 2023 into a full isolation, has left businesses unable to import materials, export goods, or even access electricity and fuel consistently. The UN report states that the enclave’s private sector is “almost non-existent,” and the labour market has “collapsed entirely.”
The occupied West Bank faces a parallel crisis:
- Israel’s checkpoints and movement restrictions have strangled internal trade.
- Thousands of work permits for Palestinians to enter Israel have been revoked.
- Businesses have shut down due to shortages of raw materials and declining purchasing power.
- Israel is withholding $4 billion in tax revenues owed to the Palestinian Authority (PA), crippling its ability to pay salaries or operate essential services.
These withheld funds include customs revenues collected by Israel on behalf of the PA, which constitute over half of the Palestinian Authority’s total budget. Without them, hospitals struggle to buy medicine, civil servants go months without pay, and reconstruction projects remain frozen.
Aid Cannot Keep Up With the Scale of Destruction
The UN warns that even with significant international assistance, economic recovery will likely take decades. Current humanitarian deliveries are insufficient due to Israel’s tight control of crossings, bureaucratic delays, and destroyed transport routes inside Gaza.
UNCTAD estimates that the cost of rebuilding Gaza now exceeds $70 billion, and that figure grows daily as the destruction continues.
Even if reconstruction began today, the report suggests that returning to pre-October 2023 GDP levels could take 30 years or more, depending on political conditions and access to global financial support.
Political Tensions Deepen the Crisis
The political implications are equally severe. The Palestinian Authority’s paralysis, combined with Israel’s withholding of financial revenues, risks triggering institutional collapse in the West Bank at a time when public frustration is already high.
Israel argues that its actions are necessary to weaken Hamas and maintain security, while Palestinian leaders say Israel is deliberately using economic pressure to maintain control over the territory.
International organizations, including the UN Security Council, have urged Israel to open more aid crossings into Gaza and abide by ceasefire agreements, arguing that economic collapse will fuel instability in the entire region.
A Future on the Brink: What Happens Next?
The UN says a durable ceasefire is the minimum condition for recovery. Without it, the Palestinian economy will continue to deteriorate, pushing millions deeper into poverty.
UNCTAD calls for:
- Immediate restoration of fiscal revenue transfers to the Palestinian Authority
- Major international economic intervention to stabilize institutions
- Lifting of movement and trade restrictions
- A coordinated, decades-long reconstruction strategy for Gaza
- Guaranteed humanitarian access without political obstruction
Without these actions, the Palestinian economy risks entering a “multi-decade slump,” the report warns.
End of an Economy, Beginning of a Global Warning
The collapse now unfolding in the occupied Palestinian territory is not only a humanitarian disaster but also a geopolitical warning. Economies do not simply recover from total destruction — they require stability, access, and time. The UN’s message is clear: without drastic international measures, the Palestinian economy may never fully recover.
This report is based on information originally published by Al Jazeera, with additional analysis and context provided by FFR News.
