(Bloomberg) — The Palestinian economy is suffering a “severe blow” as a result of the war in Gaza, facing a widening financing gap alongside deteriorating growth and dire job losses, according to estimates by the World Bank.
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The Palestinian Authority’s financing gap is expected to nearly double to as much as $1.2 billion in 2024 from $682 million last year, according to an updated report published by the Washington-based institution. That heightens “the risk of disorderly adjustments and a potential imminent fiscal collapse,” it said.
Focusing on financial policies, particularly around improving spending efficiency, “must remain a top priority in the reform agenda,” the report said.
According to the World Bank’s forecasts, nearly half a million jobs have been lost since the start of the war in October, with more than 200,000 of those in the Gaza Strip and 148,000 due to commuters from the West Bank losing access to work in Israel. Another 144,000 positions have been eliminated in the West Bank “due to escalating violence and the repercussions on supply chains, production capacity, and breadwinners’ ability to access their workplace,” the institution said.
Gross domestic product in the Palestinian economy is forecast to contract between 6.5% and 9.4% this year, depending on the severity and duration of the conflict in Gaza and on Israel’s policy changes in the West Bank, the report said.
The International Monetary Fund previously said Gaza saw “an almost complete collapse of activity” in the fourth quarter, estimating that cumulative GDP in the Mediterranean enclave and the West Bank plunged 6% in 2023.
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Israel is expanding military operations in Rafah, saying one million civilians have now moved out of the city in southern Gaza. Prime Minister Benjamin Netanyahu said he’d allow civilians to evacuate before a ground assault on the city, which Israel describes as the last bastion of Hamas leaders and fighters, as well as where hostages are being held.
Many of Israel’s allies have urged the Jewish state to agree to a cease-fire, saying the conditions in areas where civilians are being told to move to — such as tented camps north of Rafah — are inadequate.
The conflict began when Hamas fighters swarmed into southern Israel from Gaza, killing 1,200 people and taking around 250 hostage. Since then, Israel’s air and ground offensive on Gaza has killed more than 35,000 people, according to the Hamas-run health ministry. Hamas is considered a terrorist organization by the US and European Union.
Read more: Israel Deepens Rafah Push, Says 1 Million Civilians Move Out
Gaza’s income per capita declined to the lowest level on record last year, with GDP per capita dropping an annual 28% to just over $1,000.
“Nearly every Gazan is currently poor,” according to the World Bank’s report. “At least one in four Gazans are experiencing catastrophic hunger, and 95% of the population is suffering from food insecurity.”
(Updates with IMF estimates in sixth paragraph.)
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