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The economic impact of the destruction in Gaza

GENEVA, Switzerland, (UNCTAD) – The United Nations Conference on Trade and Development (UNCTAD) released a report on the social and economic deterioration in Gaza since the beginning of the military operation after 7 October 2023. The report quantifies GDP loss, recovery timelines, and enduring effects on poverty and household expenditure. It paints a daunting picture of the development challenges ahead.

Utilizing innovative satellite imagery and official data, UNCTAD currently estimates that Gazan economy had already contracted by 4.5 percent in the first three quarters of 2023. However, the military operation has greatly accelerated the decline and precipitated a 24 percent GDP contraction and a 26.1 percent drop in GDP per capita for the entire year.

If the current military operation were to end immediately with reconstruction starting right away and the 2007-2022 growth trend persists with an average growth rate of 0.4 per cent, it would take Gaza until 2092 just to restore the GDP levels of 2022 with GDP per capita and socioeconomic conditions continuously declining. However, even with the most optimistic scenario that GDP could grow at 10 percent annually it would still take Gaza’s GDP per capita until 2035 to pre blockade level of 2006.

The recovery of Gaza’s economy from the current military operation will demand a financial commitment, several times the $3.9 billion that resulted from the 2014 military operation in Gaza and will involve a concerted international effort to restore pre-conflict socioeconomic conditions.

The economy of Gaza

Socioeconomic conditions in Gaza were dire in 2022 and the first half of 2023, with over two million Gazans confined to one of the most densely populated spaces in the world suffering inadequate access to clean water, sporadic electricity provision and without a proper sewage system. Two-third of the population lived in poverty and 45 percent of the workforce were unemployed before the beginning of the latest military operation.

UNCTAD’s assessment underscores that restoring pre-conflict socioeconomic conditions in Gaza will take decades and requires substantial foreign aid. As of mid-2023, two million Gazans faced challenges ranging from inadequate access to water and electricity to high unemployment. The ongoing military operation has displaced 85 percent of Gaza’s population, halting economic activities and further worsening poverty and unemployment.

As of December 2023, unemployment had surged to 79.3 percent. Meanwhile, 37,379 buildings equivalent to 18 percent of the Gaza strip’s total structures have been damaged or destroyed by the military operation. The Gaza Strip, half of who`s population are children, is now rendered almost uninhabitable with people lacking adequate sources of income, access to water, sanitation, health or education.

UNCTAD urges action

The Report highlights the pressing need to break the cycle of economic destruction that has rendered 80% of the population dependent on international aid and warns that a return to the pre-conflict status quo is not an option.

The possibility and speed of recovery in Gaza will depend on ending military operation, donors’ engagement and subsequent growth performance. An optimistic scenario suggests that even with an immediate end to the fighting bringing Gaza back to the socioeconomic conditions that prevailed prior to the outbreak of the current confrontation would take decades without a properly funded recovery programme fully backed by the international community.

UNCTAD’s assessment, however, warns that a new phase of economic rehabilitation cannot simply take as its goal a return to the pre-October 2023 status quo. The vicious circle of destruction and partial reconstruction needs to be broken. Gaza’s economic constraints, rooted in 56 years of occupation and a 17-year blockade, necessitate thorough understanding and realistic strategies to unlock its growth potential through measures that include restoring the Gaza International Airport (today inoperable), building a seaport and enabling the Palestinian government to develop the natural gas fields discovered in the 1990s in the Mediterranean Sea off the shore of Gaza to help finance the reconstruction of infrastructure.

The report emphasizes the importance of providing immediate and robust budget support to the Palestinian government. Such support would help prevent a wider collapse by sustaining governance, delivering essential public services, and maintaining aggregate demand through salary payments and clearance of arrears to the private sector. Foreign aid declined from a total of $2 billion, or 27 percent of GDP, in 2008, to $550 million, or less than 3 percent of GDP, in 2022.

UNCTAD underscores that resolution of Gaza’s crises requires ending the military operation and the lifting of the blockade, as pivotal step toward realizing a two-state solution along 1967 borders, in line with international law and relevant United Nations resolutions.

Donors and the international community are urged to recognize that the constraints on the Palestinian economy, specifically in Gaza, extend beyond the recent confrontation.



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