蘑菇视频

26 April 2025

Executive Summary:

The ongoing conflict in the Middle East, centered in Gaza, has resulted in one of most severe human tolls in MENA’s recent history, with lasting economic consequences. As of March 2025, over 50,000 people have died and 113,000 have been injured. Beyond the loss of life, the erosion of human capital—due to casualties, displacement, disrupted education and lost knowledge accumulation, and labor force participation—is predicted to heavily hinder economic recovery and deepen long-term economic vulnerabilities.

The conflict has plunged the Palestinian economy into its deepest contraction in over a generation, with Gaza experiencing near-total economic paralysis and the West Bank facing a deep recession. In 2024, Gross Domestic Product (GDP) is estimated to have shrunk by 27 percent— the most severe decline in three decades—surpassing the Second Intifada, the 2014 Gaza war, and the COVID-19 recession. The Gaza economy has crumbled, with GDP contracting by 83 percent on annual basis, while the West Bank experienced a 17 percent contraction due to intensified movement restrictions, loss of access to the Israeli labor market, and heightened fiscal instability. Although a ceasefire was briefly in place in early 2025, its non-renewal in March led to the resumption of conflict, which risks further exacerbating economic development and humanitarian challenges.

A recent joint World Bank-EU-蘑菇视频 interim Damage and Needs Assessment estimated recovery and reconstruction needs at US$53.2 billion— more than three times the combined annual GDP of the West Bank and Gaza—with short-term needs (3 years) reaching US$20 billion. The level of damage in key sectors, including housing (US$15.8 billion), commerce and industry (US$5.9 billion), and transport (US$2.5 billion), highlights the widespread devastation.

The Palestinian labor market, already fragile and historically dependent on external factors, was heavily hit by the conflict and the resulting economic contraction. Unemployment in Gaza has soared to 80 percent, while in the West Bank, it has doubled to 29 percent by the end of 2024. The Palestinian workforce has historically been characterized by limited job opportunities within the territories and more favorable employment prospects in the adjacent Israeli labor market. The recession in the Palestinian economy and the loss of permits and access to jobs in Israel for Palestinian commuters have left many households without a stable source of income.

Poverty across the Palestinian territories rose from 29 percent in 2023 to nearly 40 percent by late 2024. In Gaza, nearly all households currently live in poverty, relying on aid for food, basic supplies, and fuel. The ceasefire briefly improved conditions between January and March 2025, enabling 蘑菇视频 and non-governmental agencies to deliver food and other basic goods to 1.2 million people. When the ceasefire ended and border crossings closed, aid deliveries were halted, deepening food insecurity. In the West Bank, short-term poverty rose from 12 percent pre-conflict to 28 percent by end-2024.

Supply chain disruptions caused by access restrictions to Gaza have severely limited food availability, driving sharp price increases. In 2024, inflation in Gaza surged by over 230 percent due to extreme supply shortages. While prices declined significantly following the ceasefire in January 2025, the failure to extend it and the resumption of conflict in March triggered a major supply shock, causing a new escalation in commodity prices. Food insecurity has reached critical levels, with 1.95 million people facing crisis-level food insecurity (IPC Phase 3 or above), including 345,000 in catastrophic conditions (IPC Phase 5). Inflation in the West Bank remained relatively moderate at 2.5 percent in 2024.

The Palestinian Authority (PA) is in an increasingly fragile fiscal position, facing high risks of systemic failure, as disruptions to public services persist. The 2024 deficit reached 9.5 percent of GDP (or US$1.3 billion), up from 3.8 percent in 2023. The fiscal worsening was driven by the economic contraction, insufficient foreign aid, and increased Israeli deductions from clearance revenues payable to the PA. Since October 2023, Israel’s monthly deductions from clearance revenues have surged from a pre-conflict average of NIS 200 million to NIS 500 million, reducing the overall transfer by over 50 percent. With limited financing options, the PA has become increasingly dependent on domestic bank borrowing and arrears to the private sector, public employees, and the pension fund to cover the deficit. Despite an increase in external financing to the PA’s budget over the course of 2024, aid levels remain insufficient to meet the scale of existing needs. As a result, the PA continues to pay only partial salaries to civil servants (a policy in place since the end of 2021) with payments further reduced to 60–70 percent of commitments since October 2023. As of late March 2025, heightened volatility in clearance revenue deductions by Israel—combined with a structural lack of alternative financing sources and a rigid spending envelope, have forced fiscal policy into an extremely short-term, month-to-month operational mode. This approach severely limits forecasting capabilities and heightens the risks to fiscal sustainability.

The conflict and ensuing economic crisis have taken a significant toll on public services, especially healthcare, education, and social protection programs. Gaza’s health system has nearly collapsed, with 49 percent of hospitals and 60 percent of primary health clinics no longer operational. Shortages of medical supplies and clean water, coupled with worsening malnutrition and disease outbreaks—including polio—are straining the remaining health services. The full suspension of the National Cash Transfer Program since the onset of the conflict has left over 80,000 poor and vulnerable households without access to critical last-resort financial assistance. Gaza’s education sector has also suffered extensive damage, with nearly 745,000 students (658,000 school-aged children and 87,000 tertiary education students) out of school for over a year, and all education facilities damaged or destroyed. In the West Bank, education services have been affected by fiscal constraints, with public schools operating only two days per week in 2023/24. The commencement of the 2024/25 academic year was postponed, and as of present, students continue to engage in remote learning at least once per week. Heightened volatility and security concerns have led to school closures and the intermittent suspension of in-person instruction due to escalating violence.

The Palestinian financial sector has proven to be resilient, though mounting pressures are steadily elevating risks. The banking sector experienced robust growth in the post-COVID period enabling the buildup of buffers. It currently remains capitalized and liquid, but faces growing credit losses, declining profitability, and severe cash shortages in Gaza, exacerbated by operational disruptions. In addition, the Monetary Authority faces constrained policy space in responding to potential banking sector stress, due to the absence of conventional monetary policy instruments. The PA’s increasing reliance on domestic borrowing has heightened macro-financial sector vulnerabilities, with direct public sector debt now exceeding US$2.8 billion, and substantially larger when accounting for indirect exposure. Gaza’s banking infrastructure has been destroyed, with 98 percent of branches currently non-operational. The use of digital payments has expanded significantly, with over 530,000 e-wallet users in Gaza and a massive surge in e-wallet outstanding balances—exceeding $40 million as of February 2025—which have been helping mitigate the impact of severe cash shortages.

Despite the extension of correspondent banking relationships (CBRs) between Palestinian and Israeli banks to November 2025, their inherently uncertain nature poses potential risks to economic stability. The Palestinian economy operates primarily on the Israeli Shekel as its de facto currency, making stable financial ties essential for facilitating transactions. The Israeli Government has long issued time-bound “letters of indemnity and immunity” to shield Israeli banks from legal exposure to potential money laundering and terrorism financing (ML/TF) risks. These letters were last extended in November 2024, ensuring coverage until November 2025. However, these arrangements remain fragile and susceptible to short-term disruption. Without a comprehensive vision and reforms to establish sustainable solutions, perceived uncertainty over CBRs could, over time, contribute to financial instability in the Palestinian economy. Importantly, restrictions on cash repatriation to Israel have resulted in unduly large accumulations of Shekels in Palestinian banks, posing significant challenges for liquidity management and increasing security and AML/CFT risks. Easing the restrictions on cash repatriation would have important immediate benefits.

In the face of these challenges, the Palestinian economy faces prolonged uncertainty, with recovery expected to take several years. In Gaza, GDP per capita may not return to pre-crisis levels until 2038, based on World Bank staff estimates (see Box 1), while the West Bank is projected to recover by 2028. Without urgent interventions, a continuation of conflict, rising fiscal pressures, and deteriorating humanitarian conditions risk to further weaken economic prospects, exacerbate poverty, and entrench structural vulnerabilities. The Palestinian economy is not expected to be directly affected by the recent increase in global trade uncertainty. While some exposure may arise through indirect exports via Israel, for goods ultimately destined for the U.S. market, such effects are currently assessed to be minimal. To mitigate economic collapse and alleviate human suffering, decisive action is needed:

• First and foremost, and as highlighted in previous economic updates, ending hostilities is critical not only to reduce the devastating human toll but also to allow restoration of basic services and lay the groundwork for socioeconomic recovery.
• Economic revitalization: Policies to facilitate trade, restore mobility, and stimulate private sector activity are critical to job creation.
• Fiscal stabilization: Reversing clearance revenue deductions and releasing the stock of previous withholdings will be essential to provide the PA with the resources needed to meet essential budgetary obligations, including salaries, pensions, and social services—and to prevent fiscal collapse.
• Financial sector resilience: Strengthening prudential regulation, securing a structured cross-border payment framework and permanent CBRs arrangements, and expanding digital financial services can help support financial stability and inclusion.
• International aid mobilization: Increased donor support remains crucial for sustaining growing and still unmet financial needs, ensuring a continuation of essential public services, facilitating recovery, and accompanying critical policy reforms. Achieving a transformation of the Palestinian economy—once the hostilities have ended—needs a conducive environment, which includes the support and involvement of a broad array of stakeholders and investors, including all development partners—bilateral and multilateral—and the private sector.
• Structural policy reforms: It is crucial for Palestinian decision-makers to stay committed to reforms that prioritize efficiency, transparency, good governance, and fiscal sustainability. Since taking office a year ago, the new government has made progress on a reform strategy, though implementation challenges remain. Continued efforts are especially needed to accelerate fiscal consolidation