The recent violent conflict between Israel and Hamas has taken a severe toll on the economy of the occupied West Bank, with soaring unemployment and business closures plunging many Palestinian construction workers and business owners into poverty.
Years of Progress Reversed
The West Bank had experienced economic growth in recent years prior to the latest outbreak of violence. Unemployment had been declining, wages were rising, and the Palestinian Authority’s tax revenues were increasing as business activity expanded. However, much of this progress has now been swiftly reversed.
According to the Palestinian Labour Minister, unemployment in the West Bank has skyrocketed from 15% to 38% since the conflict began. With many businesses shuttered due to both the fighting and pandemic restrictions, an “impending societal implosion” now threatens the territory.
Construction Industry Devastated
The construction sector, formerly a source of good jobs for many West Bank residents, has been particularly hard hit. It is estimated that 90% of construction workers have lost their jobs.
Kareem, a 33-year-old father of three, recounts how he used to earn $30 a day working at construction sites in Israel. But with those sites now closed due to rockets and airstrikes, he has had to resort to collecting and selling scrap metal to feed his family, earning only $7-10 a day.
Many former construction workers face similar hardship. Some, unable to afford rent, have moved into crowded shelters with relatives. Most struggle to afford basic necessities as consumer prices continue rising.
Businesses Battered from All Sides
Owners of small businesses and factories in the West Bank describe being battered economically from all sides.
Supply chains have been disrupted by border restrictions and infrastructure damage. With Gaza’s access points completely closed off, imports and exports in much of the territory have come to a standstill. Many stores’ inventories are empty or running low.
At the same time, local demand has plummeted with so many residents now unemployed and impoverished. Fear of infection and lockdown orders have also kept customers away from shops and cafes.
One garment factory owner had to shut down production lines after losing his customer base in Israel due to the turmoil. He was forced to lay off his 150 employees, most of whom are now struggling to survive without paychecks.
Government Finances in Crisis
The economic crisis has also left the Palestinian Authority government on the verge of fiscal collapse. The PA relies heavily on customs duties and other tax transfers from Israel to fund its budget. But transfers have mostly stopped since the conflict erupted, with only partial, sporadic payments made.
| Month | Tax Transfers Received | Budget Deficit |
|---|---|---|
| January 2023 | $197 million | $129 million |
| May 2023 | $5 million | $285 million |
This has forced the PA to halve its civil servants’ salaries and suspend pay to retired military personnel. It has also stopped covering treatment costs for Palestinians at Israeli hospitals. Without aid from international donors, the PA may lack the funds to perform even basic governing functions soon.
Recovery Expected to Take Years
While mediators have recently negotiated a tentative ceasefire between Israel and Hamas, lasting economic damage to the occupied territories seems unavoidable. The PA estimates it could take two years simply to return the West Bank’s economy back to pre-conflict levels of activity.
A drawn out recovery period seems likely for several reasons:
- Investment has dried up – Even if violence abates, outside investors will be wary of sunk costs from potential future unrest. Local banks are also reluctant to lend for business expansion amid the uncertainty.
- Infrastructure requires rebuilding – Critical trade infrastructure like customs facilities and roads connecting the West Bank economy to the outside world have been destroyed. These must be repaired to restore business flow.
- Poverty traps hinder consumer demand – West Bank residents’ loss of income and purchasing power may reverberate through the economy for months or years to come, creating a vicious cycle of unemployment and low business revenues.
To escape this downward spiral, substantial foreign aid and private investment will be essential for reconstruction efforts in the West Bank. But some commentators worry donor fatigue could set in after repeated Gaza-Israel crises, shortchanging the recovery.
Without economic hope on the horizon, desperation and unrest seem poised to continue plaguing the occupied Palestinian territories long after the most recent ceasefire pact. Stability for Israelis and Palestinians alike depends heavily on restoring economic vibrancy and employment to the battered West Bank economy in the months ahead.
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