Palestinian Economy Suffers Historic Contraction Under Israeli War and Controls

Updated by Faith Barbara N Ruhinda at 1617 EAT on Tuesday 25 November 2025

The economy of the occupied Palestinian territory is experiencing its most severe collapse on record, driven by the scale of Israel’s war in Gaza and longstanding restrictions on movement and trade, according to a new United Nations report.

Released Monday, the assessment by the UN Conference on Trade and Development (UNCTAD) finds that two years of Israeli military operations, combined with entrenched curbs on access and commerce, have pushed the territory into an economic downturn now ranked among the 10 worst globally since 1960.

“Extensive damage to infrastructure, productive assets and public services has erased decades of socioeconomic progress in the occupied Palestinian territory,” the report said, referring to the Gaza Strip and the West Bank, including East Jerusalem.

It warned that Gaza is facing “the most severe economic crisis on record”.

The findings were released as Israeli attacks on Gaza continue despite a six-week ceasefire between Israel and the Palestinian group Hamas.

Israel’s offensive began on October 7, 2023, after fighters from Hamas and other Palestinian groups attacked southern Israel, killing an estimated 1,139 people and taking about 240 captives into Gaza.

In response, Israel launched a wide-ranging bombing campaign and tightened its longstanding blockade of Gaza, turning what had been a 16-year siege into a total closure. Its attacks have killed at least 69,733 people and wounded 170,863, with more than 300 deaths reported since the ceasefire began last month.

According to the UNCTAD report, the Palestinian gross domestic product (GDP) had fallen back to its 2010 level by the end of last year, while GDP per capita returned to levels last seen in 2003—effectively wiping out 22 years of development in under two years.

In Gaza, GDP collapsed by 83 percent in 2024 compared with the previous year, amounting to an 87 percent contraction over two years, leaving total output at just $362m. GDP per capita dropped to $161, among the lowest figures recorded anywhere in the world.

The report noted that nearly two decades of Israeli restrictions on trade, movement and access have produced near-total dependence on external aid, while Israeli attacks have damaged an estimated 174,500 structures in Gaza, pushing the enclave into what it described as “utter ruin”.

The occupied West Bank is also facing its most severe economic downturn on record, driven by extensive movement and access restrictions and a sharp collapse in employment.

UNCTAD estimates that the cost of reconstruction and recovery in Gaza alone will exceed $70bn and urges a comprehensive recovery strategy supported by coordinated international assistance, the restoration of fiscal transfers, and immediate steps to ease restrictions on trade, movement and investment, Al Jazeera reported.

“Even with substantial aid, recovery to pre-October 2023 GDP levels could take decades,” the report said.

The agency warned that without swift, large-scale intervention, the destruction caused by Israel’s war and longstanding systemic restrictions will lock the Palestinian economy into a prolonged slump.

For any meaningful recovery to begin, UNCTAD stressed, the ceasefire reached in October must hold.

“UNCTAD’s report calls for immediate and substantial intervention by the international community to halt the economic freefall, address the humanitarian crisis, and lay the groundwork for lasting peace and development,” it added.

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