Palestinian Economy in Crisis Amid War, Facing Deep Recession

The Palestinian economy is experiencing a severe downturn across both the West Bank and Gaza Strip, three years into ongoing conflict. In Gaza, military operations and widespread damage to infrastructure have paralyzed key economic sectors. The West Bank faces economic slowdown due to restrictions on movement, trade, and labor, compounded by a deepening financial crisis. Economic indicators reveal a decline in GDP, rising unemployment, reduced household capacity to meet basic needs, decreased business liquidity, and increased reliance on aid and borrowing. Analysts warn that current conditions hinder recovery prospects, making economic revival difficult even with adequate funding.

In the West Bank, GDP has contracted by approximately 18%, with businesses struggling due to movement restrictions, higher operational costs, and delays in goods and labor. Unemployment has surged from about 13% before the conflict to nearly 28%, while the average real daily wage has dropped by about 19% from $47.1 to $38.1. These issues are exacerbated by restrictions on work permits and movement, leading to lost work hours and increased production costs. The financial crisis facing the Palestinian Authority, stemming from disputes over clearance revenues and Israeli deductions, has reduced its ability to pay salaries and fund public services. Public debt has risen to $4.7 billion by mid-2026, and government salary disbursements have fallen to about 50% of pre-war levels.

The agricultural sector, particularly olive cultivation, has suffered significant losses. By September 2026, over 98,000 olive trees were damaged, with crop losses exceeding $66.5 million and total sector losses reaching approximately $128.7 million. Attacks on farmers, including denial of access and crop theft, have impacted thousands of families reliant on this income.

In Gaza, 92% of economic facilities have been damaged or destroyed since October 2023. GDP plummeted by nearly 77% from $659.6 million in Q2 2023 to $152.2 million in Q2 2026. Agricultural and industrial production fell by 94%, and construction by 99%. Unemployment in Gaza has soared from around 45% to approximately 85%, with the average real daily wage dropping by 87% from $16 to $2.1. Households are depleting savings and selling assets to survive, eroding future earning potential. The estimated material damage in Gaza is $35.2 billion, with economic and social losses at $22.7 billion. Reconstruction needs are estimated at $71.5 billion.