The lack of peace and reconciliation on the political horizon has created an unsustainable economic situation in the West Bank and Gaza. Even though donor aid had increased government-funded services and fueled consumption-driven growth from 2007 to 2012, this model of growth has proved unsustainable. Donor support has significantly declined in recent years, and naturally aid cannot sustainably make up for inadequate private investment, anyway constrained by weak investor confidence because of ongoing restrictions and the lack of political progress. Recovering slowly from recession in2014, the growth rate is projected to hover around 3.5 % in the medium term.
The 2014 war in Gaza created a humanitarian crisis and caused US$1.7 billion in losses to the economy, which continues to suffer to this day. Even though growth in the Gaza Strip reached 7.3% in 2016, due to increased construction, Gaza’s economy is not expected to rebound to its pre-2014 war level until 2018. Alongside its stunted recovery, Gaza suffers from severe shortages of electricity with rolling blackouts.
In 2016, the unemployment rate remained stubbornly high at 27%: 42 % in Gaza and 18% in the West Bank. Youth unemployment in Gaza is particularly worrying at 58%. And, although nearly 80% of Gaza’s residents receive some form of aid, poverty rates are very high.
The current decline could be reversed in an environment where sustainable, private sector-led growth is fostered, coupled with a commitment of ongoing financial support from the international community. A dynamic private sector can generate the sustainable growth needed; however, restrictions put in place by the Government of Israel continue to stand in the way of potential private investment. Access to Gaza remains highly controlled, and much of Area C, which makes up 60% of the West Bank, is inaccessible to Palestinians.
Last Updated: Apr 01, 2017