Attachments
Eleven months into the conflict in the Middle East, the Palestinian territories are nearing economic freefall, amidst a historic human- itarian crisis in the Gaza Strip. Official data reveals a 35 percent decline in real GDP in the first quarter of 2024 for the Palestinian territories overall, marking its largest economic contraction on record. The conflict has brought Gaza’s economy to the brink of total collapse, with a staggering 86 percent contraction in Q1-2024. The near-complete halt of economic activity has left the Strip in a deep recession, with its share of the Palestinian economy plummeting from 17 percent—on average in previous years—to less than 5 percent currently. In parallel, the West Bank economy contracted by 25 percent in Q1-2024, with trade, services, construction, and manufacturing sectors experiencing the most significant declines. The impact on people has been catastrophic: an estimated 40,000 people have died and 30,000 left severely injured. The ongoing hostilities and closures have prevented the entry of essential supplies in the Strip, leading to widespread food insecurity and severe shortages of water, fuel, and medical equip- ment, alongside the collapse of service provision. The humanitarian situation is exacerbated by the displacement of approximately 1.9 million people, with shelters overflowing and insufficient sanitation services. Reports of famine-like conditions, malnutrition and disease are increasing, while major barriers continue to severely limit access for humanitarian aid hampering efforts to address the crisis.
The Palestinian Authority’s (PA) financing gap is projected to reach US$1.86 billion in 2024, more than double the gap of 2023, which may pose elevated risks for a systemic failure, especially affecting public service delivery. Worryingly, the gap continues to be mostly filled with borrowing from domestic banks and arrears to the private sector, public employees, and the pension fund. On a positive note, there is an anticipated rise in donor contributions. Between July and August 2024, both the World Bank and the European Commission formally announced their intentions to boost grant allocations to the Palestinian Authority (PA) in the near term, as part of a comprehensive reforms plan.