As the Israel-Palestine conflict continues into its third year, experts warn that Palestine’s economy remains under immense pressure. The ongoing war, combined with Israel’s economic control, has severely limited recovery prospects across Gaza and the West Bank.
Economists say that Palestine’s economy cannot rebuild without full sovereignty and control over its resources. According to Professor Naser Mufrej of the Arab American University, Israel’s restrictive measures will prevent any major recovery in the coming months. He added that peace and independence could attract investments and renew optimism among international donors.
Raja Khalidi, director general of the Palestine Economic Policy Research Institute, believes an independent Palestine could become a strong regional player. He pointed to the country’s potential in agriculture, industry, and banking, which could thrive under an autonomous system.
Currently, Israel exerts significant control over Palestine’s economy, managing trade restrictions, labour flows, and tax revenues. The Israeli shekel remains the main currency, and revenue transfers to the Palestinian Authority are often delayed. This has made it difficult for the government to pay salaries and maintain essential public services.
In Gaza, the situation is dire. The World Bank reported that Gaza’s GDP dropped by 83 percent last year and another 12 percent early this year. Bombardments have devastated infrastructure, leaving economic activity nearly frozen. The West Bank faces similar challenges, with 850 movement barriers restricting the mobility of over three million Palestinians. The UN has described the resulting contraction as the worst in half a century.
Small and medium-sized businesses are struggling, with 97 percent reporting reduced sales and layoffs. Experts estimate that without restrictions, the Palestinian economy could have added $170 billion in GDP since 2000.
Global analysts note that the conflict’s effects extend beyond the region, disrupting trade routes and raising energy costs. While some Western nations have recognized Palestine diplomatically, economists say real progress depends on fiscal independence and political stability. Without sovereignty, Palestine’s economy will remain vulnerable to external control and continued decline.
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