The Palestinian Economy is in Big Trouble

Israel vs Hamas Impact on the Palestinian Economy

There is no question that Palestine's future is in jeopardy. According to reports by the United Nations Development Programme (UNDP) and the Economic and Social Commission for Western Asia (ESCWA), hundreds of thousands of jobs have been lost since the start of the Israel-Hamas War. Poverty rates are also projected to rise from 20 percent to 45 percent. Each additional month the war goes on, Palestine sends roughly a hundred thousand more people to poverty (this number is increasing). article projected that Palestine will suffer an economic setback of 16 years, which may or may not be an exaggeration as explained later on in this article. 

Let's take a quick look at why a war has a significant impact on any economy. 

A lot of effort goes into fighting wars. The government is continuously providing the military with food and supplies, residents near war sites are forced to flee their homes, and the entire country may be in a state of panic. As a result, resources such as human capital, financial assets, and industrial capacity are overallocated. Economic growth is forced to a halt as the country's main focus shifts from expanding its market to defending its people. Because of this change in priority, the government is obligated to increase its spending, which will lead to lower GDP. 

Countries at war are also prone to damaged infrastructure. This includes the destruction of roads, bridges, factories, houses, and more. Reconstruction and recuperation will only leak more money from the government's budget. Additionally, countries at war are at risk of loss of human capital as numerous financial providers lose their lives, leaving their families with no source of income. 

Let's now go back to what this means for Palestine.

As the war persists, Palestinians are longing for an end where they will be able to get back on their feet. The aftermath, however, may be just as bad as the war itself, financially. Below is a graph that explains this idea more in detail.

This graph is extracted from an article by UNDP. It illustrates the drop in the GDP since 2023 and the projections for the next five years. This graph seems to be a little bit more optimistic considering that another source claimed that the Palestine economy won't see any light until 2040. 

There is some reason to believe that Palestine can show its resiliency and bounce back within a few years after the end of the war like it did in 2004 after the GOI imposed restrictions on goods across the West Bank. However, this situation is different, and it is evident that Palestine is in a lot of trouble.