The World Bank said that the Israeli war on the Gaza Strip is pushing the Palestinian territories into an unprecedented crisis, estimating that the Palestinian economy lost by a quarter during the current year after another major contraction in 2023, which is “a slowdown without precedent in recent memory.”
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“The ongoing conflict in the Middle East continues to have a devastating impact on the Palestinian economy, pushing the Palestinian territories into an unprecedented crisis,” the World Bank said in a new assessment of the war’s aftermath, released Monday. “The war has resulted in a staggering number of casualties, widespread displacement affecting some 1.9 million people, and massive destruction of infrastructure in Gaza. The ongoing hostilities have led to a sharp decline in economic output and the collapse of basic services in both the West Bank and Gaza, amid rising poverty rates across the Palestinian territories. The World Bank explained that real GDP in the West Bank contracted by 23% and in the Gaza Strip by 86% in the first half of 2024, and estimated that the Palestinian economy would contract by 26% for the full year of 2024.
It added: “Indeed, the economic slowdown (in the Palestinian territories) caused by the conflict is unparalleled in recent memory (…) The impact of the conflict has now surpassed all previous economic crises in the Palestinian territories over the past two decades, including the Second Intifada in 2014.” 2000, the internal division in 2006, the Gaza war in 2014, and the shock of the Covid-19 pandemic in 2020.
The bank pointed out that all sectors were severely affected, with the construction, manufacturing, services, and trade sectors witnessing the largest decline, and the conflict disrupted labor markets, leading to high unemployment rates, especially in Gaza, where more than 4 out of 5 people are currently unemployed.
However, the World Bank said that the Palestinian financial sector remains resilient, although the conflict has exacerbated existing challenges.
He added: While the banking sector remains well capitalized, it faces increased risks from credit losses, diminishing profits, and practical operational challenges, especially in Gaza, where cash shortages have intensified in the sector, affecting the provision of aid, remittances, food security, and access to basic services.
He continued: The banking system’s exposure to the public sector has also increased, amplifying the underlying risks of the financial sector.
The World Bank said that the recent renewal of the arrangements for the relationship between Israeli banks and Palestinian banks for a full year until the end of November next year provided vital predictability and stability to financial sector operators.
The World Bank added: Despite the great international efforts made to arrange the situation away from temporary solutions, community rehabilitation operations remain a significant potential source of risk, over time, to the Palestinian economy.
Continued price increases
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The World Bank pointed to the continued significant rise in prices in the Gaza Strip, as the consumer price index rose last October by more than 300%, year-on-year, driven mainly by supply chain disruptions.
The sharpest increases, according to the World Bank report, were in food prices, which rose by more than 440% in October 2024 compared to the same month a year ago; and fuel costs, which increased by more than 200 percent.
