Palestinian economy in West Bank faces collapse after months of war in Gaza

The already weak Palestinian economy in the occupied West Bank faces collapse after months of war in Gaza with regional impact, while the financial crisis of the Palestinian National Authority (PNA) it gets worse.

Since the beginning of the conflict between Israel and Hamas on October 7 and the increase in violence to almost unprecedented levels in West Bank territory, its economic activity has been reduced by more than half, and it will be difficult to recover in 2024 due to increasing Israeli restrictions. and the lack of solutions to end the war.

“The situation is very bad, unemployment is skyrocketing and many have not received their salaries in recent months,” laments Raja Khalidi, director of the Palestinian Economic Policy Research Institute, who warns of the “gradual economic collapse” suffered by the West Bank, where some 3.2 million Palestinians live in extreme volatility.

The crisis is perceived in towns such as Ramallah, the de facto capital of the ANP. “There is less work and clients than before the war”says Thaer, a waiter at a café in the city center.

“The situation is very bad. There were problems before, but they have gotten worse since the war and now people only buy what is fair and necessary,” says Jadala Tayem, in her vegetable store in the city.

On the weekend there is no commercial movement either, in bars, restaurants or pre-war stores, say several neighbors.

For more than three months, Israel has blocked funds it collects on behalf of the ANP, which means that this organization with government in small areas of the West Bank can hardly pay its employees, some 150,000 people, a problem it already had before the conflict but which now worsens and sinks the public sector further.

This puts officials, health personnel in medical centers or public school teachers to the limit, who only receive “a part of their salaries”clarifies Khalidi, while the ANP’s lack of liquidity and resources to maintain its basic services deepens.

Added to this is the greater militarization of the area and the vetoes of Israel’s movement of the Palestinians throughout West Bankwhere there are more military crossings permanently closed and more Army security controls that hinder the economy, commerce and work.

“Israel imposed more barriers and a greater blockade from the first day of the war, many people cannot access main roads or get to their workplace”says Khalil Shikaki, director of the Palestinian Center for Political Research and Surveys.

All this, comments the analyst, “destroys economic viability, productive capacity or commercial transportation in the West Bank,” a territory already with obstacles to economic development and fragmented by settlements and the growing colonization of Israel, which imposes a long military occupation in force since 1967.

According to the Palestinian Central Bureau of Statistics, almost 30% of West Bank companies suffered “a reduction or stoppage of its production”, and according to Khalidi, economic activity in the private sector was reduced by 50 or 60%.

“There is no demand, many reduced consumption and imports also decreased,” Explain. “It is a very strong economic fall, and although the financial system remains stable, it is being pressured to the limit.”

According to him, another factor of concern is unemployment, which has skyrocketed since October 7. “Before the war it was 16 or 17% and now it is close to 40%,” something that will cause “poverty increases” and that many are subject to levels close to subsistence.

This increase in unemployment is due to the more than 100,000 Palestinians with employment permits in Israel and its colonies, as well as tens of thousands of others who worked there illegally, who were no longer able to return to work after the war began due to Israeli restrictions.

This was a blow to the economy, “since employees in Israeli companies were 20% of the West Bank workforce,” Khalidi details.

Added to this is the decline in the tourism sector, which is key in areas such as the governorate of Bethlehem, but has now been reduced to a minimum due to the lack of visitors and pilgrims.

Many families can barely make ends meet and some cannot pay their loans to banks, and there is no prospect of improvement.

“The West Bank economy will operate at half its capacity,” Khalidi foresees, who describes a panorama in which the economic drift will continue to depend on Israel, who has real control on the ground and decides over the dysfunctional Palestinian institutions.

Meanwhile, the Israeli offensive in Loop leaves devastation almost unseen since World War II, with infrastructure and economy “totally destroyed”, a level that the West Bank did not reach, but “no one profits from the war here either”Khalidi concludes.