Economic Challenges in Gaza

As this is being written, many innocent civilians would have been killed by the Israeli occupation forces in Gaza. Sadly, the ruthless killing of Palestinians particularly in Gaza by occupying Israeli forces continues, despite calls by majority of countries and general public for a ceasefire. The US and UK have sided with the Israeli occupying forces and continue to misuse their UN status to prevent a ceasefire. A temporary ceasefire between Israel and Hamas in the Gaza Strip took effect from 24 November 2023 to 30 November 2023. Since October 7, Palestinians killed by Israeli forces amount to over 20,000, including at least 8,000 children and 6,200 women. On October 13, Israeli authorities ordered more than a million people in northern Gaza to evacuate their homes. Two months later, almost 1.9 million people – 85% of Gaza’s population are displaced. Meanwhile, diplomacy continues in the background but no material actions have been taken by neighbouring countries or the Arab nations.

Gaza, a small strip of land on the eastern coast of the Mediterranean Sea, has long been a focal point of geopolitical tensions and conflicts. The economic challenges faced by the people of Gaza are deeply intertwined with the region’s complex history, political instability, and ongoing occupation by Israeli forces. This article aims to shed light on the economic struggles in Gaza and explore the various factors contributing to this challenging situation.

Blockade and restricted movement

One of the primary economic challenges in Gaza is the blockade imposed by occupying Israeli forces, which severely restricts the movement of goods and people. The people of Gaza need permits to move in and out of the strip through two land crossing points controlled by Israelis. The blockade, in place since 2007, has had a profound impact on the region’s economy by limiting exports, imports, and the movement of individuals. This has hindered economic development, making it difficult for businesses to thrive and for the population to access essential resources.

Even though the Palestinian GDP grew by 3.9% in 2022, per capita real GDP was still 8.6% below its 2019 pre-pandemic level. Between 2006 and 2022, Gaza’s real GDP per capita contracted by 37%, while its share in the Palestinian economy diminished from 31% to 17.4%. The United Nations projected in 2019 that the Israeli occupation cost the Palestinian economy some $47.7bn in fiscal revenues between 2000 and 2017.

Three decades have been passed since Oslo Accords, however, the intended convergence between the Palestinian economy and Israel’s remains thwarted by occupation policies. Instead, the divergence between two economies have increased, with the Palestinian per capita GDP currently standing at just 8% of Israel’s. Gaza’s economy is not well integrated with the global economy mainly due to Israeli occupation and blockade, which results in its dependence on Israel. As per 2022 data, Israel accounted for 72% of total Palestinian trade in 2022.

Infrastructure destruction

The region has witnessed frequent bombardment by the Israeli forces, resulting in the destruction of critical infrastructure, including homes, schools, hospitals, and businesses. Rebuilding efforts are hampered by resource limitations and restricted access to construction materials due to the blockade, prolonging the economic recovery process. The economic challenges in Gaza are closely linked to the state of its infrastructure and services. The region has struggled to rebuild and maintain essential facilities such as water and sanitation systems, electricity grids, and transportation networks. Destruction from conflicts and restrictions on imports of construction materials hinder the reconstruction process, perpetuating a cycle of economic stagnation. Insufficient access to basic services not only affects the well-being of the population but also impedes the growth of businesses and industries that rely on stable infrastructure.

High unemployment rate

Gaza faces staggeringly high levels of unemployment, with a significant portion of the population struggling to find stable employment opportunities. The combination of the blockade, political instability, and the continuous destruction of infrastructure by occupying Israeli forces has led to the decline of industries and businesses, exacerbating the unemployment crisis. Youth unemployment is particularly concerning, as a significant portion of the population is under the age of 30.

Unemployment remained high at 24% across the Occupied Palestinian Territory, 13% in the West Bank and 45% in Gaza, with women and youth hit hardest. The lack of employment opportunities not only hampers individual economic prospects but also contributes to social and political unrest and is a major driver of poverty in the region.

Poverty and humanitarian crisis

The economic challenges in Gaza have contributed to widespread poverty and a humanitarian crisis. A significant percentage of the population is dependent on humanitarian aid for basic necessities, including food, water, and healthcare. As per United Nations Conference for Trade and Development (UNCTAD), 80% of Gaza’s population is dependent on international aid. Further, the region is facing a 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. The lack of economic opportunities and resources has created a cycle of poverty that is difficult to break.

Electricity and water shortages

Gaza faces chronic shortages of electricity and clean water, further impeding economic activities. Insufficient power supply (roughly 50% of the total power supply requirements) disrupts businesses and daily life, while limited access to clean water and adequate sewage system poses health risks and strains the healthcare system. As per UNCTAD report, it means a 65% likelihood of being poor, 41% likelihood of dropping out of the labour force in misery, and for those looking for work, a 45% likelihood of being jobless.

Limited access to financial resources

The financial isolation of Gaza has made it challenging for businesses and individuals to access international financial markets. This lack of financial integration restricts economic growth opportunities and inhibits the region’s ability to attract investments. The lack of financial support hampers the region’s ability to invest in economic development projects, modernize infrastructure, and diversify its economy. International collaboration and support are crucial for addressing the economic challenges in Gaza. Encouraging donor countries and international organizations to prioritize sustainable economic development can contribute to long-term stability. The lack of national currency exposes the Palestinian’s economy to Israel Shekel, which leaves no space for monetary policy. Moreover, strength of Shekel against other trading currencies put Palestine’s trade, which is already very restricted due to Israel’s blockade, into jeopardy.

The economic challenges in Gaza are deeply rooted in a complex web of historical, political, and geopolitical factors. Achieving sustainable economic development in the region requires addressing the root cause, which is to end Israeli occupation and blockade. International efforts, diplomatic solutions, and coordinated initiatives are helpful in providing the people of Gaza with the economic opportunities and stability they desperately need. But the only meaningful and sustainable way forward for Gaza is for the Israeli occupation to end and the Palestinians to be given back their rightful land with complete sovereignty to determine its own future, both pollical and economic. Until occupation ends, the residents of Gaza will continue to grapple with the formidable challenges that hinder their economic prosperity and overall well-being.


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