Israeli blockade of Gaza devastated its economy even before latest conflict, UN agency says

GENEVA

While the current crisis has worsened conditions in the Gaza Strip, a decades-long blockade had already devastated the besieged enclave's economy, leaving 80% of the population dependent on international aid, the UN Conference on Trade and Development (UNCTAD) said on Wednesday.

UNCTAD's latest report showed that 2022 was another "bad year" for Palestinians as economy of the occupied Palestinian territory remained below its 2019 pre-pandemic level.

"Against a backdrop of heightened political tensions, deepening dependency on the occupying power and a stalled peace process, the Palestinian economy continued to operate below potential in 2022 as other persistent challenges intensified," it said.

"These include loss of land and natural resources to Israeli settlements, endemic poverty, a shrinking fiscal space, declining foreign aid and the build-up of public and private debt."

Although the Palestinian GDP grew 3.9% in 2022, UNCTAD said, per capita real GDP was still 8.6% below its 2019 pre-pandemic level. In Gaza, real GDP per capita was 11.7% below the 2019 level - close to its lowest level since 1994.

Unemployment remained high at 24% across the occupied territory –​​​​​​​ 13% in the West Bank and 45% in Gaza.

Meanwhile, poverty increased, rendering 40% of the population in need of humanitarian assistance.

"Three decades after the Oslo Accords, the hoped-for convergence between the Palestinian economy and Israel’s remains obstructed by occupation policies. Instead, the two economies have diverged, with the Palestinian per capita GDP currently standing at just 8% of Israel’s," it underlined.

The report also highlighted the Palestinian economy’s "forced dependency" on Israel.

Chronic trade deficits and heavy reliance on Israel, which accounted for 72% of total Palestinian trade in 2022, due to excessive production and transaction costs and trade barriers with the rest of the world, according to the report.

"Over-reliance on precarious employment in Israel and settlements exposes the Palestinian economy to shocks in a volatile environment characterized by frequent crises, while lack of monetary and fiscal space leaves little room for effective policy response to shocks and crises," the UN agency warned.

Noting that the impact of the occupation on Palestine has been mitigated by donor aid in the past, the report stressed that the sharp decline in 2022 – when the Palestinian government received only $250 million in donor budget support and $300 million for development – contrasts with the $2 billion, or 27% of GDP received in 2008, which drops to less than 3% of GDP in 2022.

The restrictions on the movement of people and goods, destruction of productive assets in frequent military operations and the ban on the import of key technologies and inputs have hollowed out Gaza’s economy, it said.

Investment in 2022 decreased to 10.7% of Gaza's GDP, or a mere 1.9% of the Palestinian GDP. From 2006 to 2022, Gaza's real GDP per capita declined by 27%, and its share in the Palestinian economy shrank from 31% to 17.4%.

"The restrictions on movement also impede access to health and other essential services, as 80% of Gazans depend on international aid," it said. "Living in Gaza in 2022 meant confinement in one of the most densely populated spaces in the world, without electricity half the time, and without adequate access to clean water or a proper sewage system."