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Israel's war on Gaza is strangling the West Bank's economy

Israel's war on Gaza is strangling the West Bank's economy
5 min read
01 February, 2024
In-depth: Restrictions on movement, revoked permits, and military raids have left the West Bank's economy on the brink of collapse.

Since Israel launched its unprecedented military campaign in Gaza - which has killed close to 27,000 Palestinians - the occupied West Bank has been placed under lockdown.

Entrances to most villages and cities have been blocked by Israeli military checkpoints and road closures.

There has also been soaring violence across the occupied territory, with the Israeli army conducting near-daily incursions and settlers regularly carrying out attacks, keeping Palestinians mostly confined to their towns.

As of 30 January, the UN recorded 370 deaths and 477 settler attacks in the West Bank and East Jerusalem since the war started.

These restrictions on movement have choked the flow of goods and workers and severely disrupted the lives of Palestinians.

“Because of supply chain bottlenecks, prices are going up, then incomes are lower, and the demand is shrinking,” Dr Yousef Daoud, professor of economics at Birzeit University in Ramallah, told The New Arab.  

Transport costs in the West Bank have increased due to the rising number of military checkpoints and the blockade of many towns by Israeli authorities, pushing food prices up.

In response to Hamas’s attack, the Israeli government indefinitely suspended over 100,000 permits for Palestinian labourers who work in Israel and Israeli settlements inside the occupied West Bank and East Jerusalem.

“That has caused an economic disaster. Labourers working in Israel were bringing in a lot of cash,” Fadi Kattan, a French-Palestinian chef living in Bethlehem told TNA. “You can imagine what it means to those people and the local economy overall.”

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Many Palestinian families rely on jobs in Israel, which bring in up to three times the salary of local wages given the limited employment opportunities and lower earnings offered in the West Bank’s job market.

Palestinian workers don’t receive social protection benefits or unemployment compensation from the Israeli government, nor from the Palestinian Authority (PA) which rules parts of the occupied territory, leaving the unemployed with nowhere to turn.

Daoud explained that as day labourers, Palestinians who used to be employed by Israel firms are having a “very hard time” providing for their families, having been out of work for nearly four months,

Before the Gaza war, more than 150,000 Palestinian workers from the West Bank reportedly entered Israel or illegal settlements daily to work in the construction and agriculture industries.

Israeli military raids and settler violence in the West Bank have escalated since the war on Gaza began. [Getty]

In December, 8,000-10,000 Palestinian workers were permitted to resume work in settlements following pressure from Israeli business and factory owners.

“There were 150,000 to 180,000 people working in Israel prior to the war. Only 25 percent of them, or tens of thousands, continue to work there,” Raja Khalidi, director general of the Ramallah-based Palestine Economic Policy Research Institute (MAS), told The New Arab.

The MAS’ director estimated that salaries of Palestinian workers total around $3.5 billion a year, which he said accounts for approximately “one quarter” of the combined gross national income (GNI) of the West Bank and Gaza.

The war has led to a decline in the Palestinian gross domestic product (GDP) by 33% in the fourth quarter of 2023. In the West Bank alone, the GDP fell by 22% while unemployment is estimated to have skyrocketed to 30%, up from 14% before the war.

In a joint press release, the Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA) issued an economic forecast indicating that the performance of the Palestinian economy will continue to drop in 2024 by nearly 5 percent, and unemployment will reach 35 percent approximately.

Kattan noted that the city of Bethlehem, as a popular tourist destination, has been hit particularly hard by the Israeli war on Gaza. It was barely recovering from the economic hit of the Covid-19 pandemic, and last autumn was finally set to mark a restart of tourism as most hotels in Bethlehem were fully booked for October through to December.

“Then 7 October came. All hotels, most restaurants and souvenir shops shut down,” the French-Palestinian chef said. “5,000 employees were working in the tourism industry, the impact is enormous.”

Kattan himself has not been able to reopen his guesthouse and restaurant, which has been closed since the outbreak of the pandemic.

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“I was planning to start renovation works between October and November so we could open again in December,” the business owner said. A boutique hotel in Bethlehem’s Old City that he opened in May 2023 with Chilean-Palestinian entrepreneur Elizabeth Kassis Sabagh was also forced to close.

Apart from royalties received for pre-order sales of his upcoming book, ‘Bethlehem: A Celebration of Palestinian Food’, fees for talks abroad, and his family-owned business, it is very difficult for the Bethlehemite business owner to make ends meet while he is still paying the salaries of his hotel staff.

Discussing the economic impact of the war in Gaza, economist Raja Khalidi underscored its “profound” effect on the local market, which is reflected in the deflation of wages, declining purchasing power, a shortage of liquidity, and increasing uncertainty affecting West Bank residents.

Israeli forces have launched multiple military operations in the West Bank since the Gaza war began. [Getty]

“Every moment, people are trying to scrape a living. It applies in different sectors, more or less in different regions,” he said, adding that Palestinian commuters are suffering greater stress and severe delays in circumnavigating checkpoints or roadblocks since Israel fully blockaded the occupied West Bank following Hamas’s attack.

“Unless there’s an early and rapid reconstruction that begins this year, which I doubt, there’s going to be about a 40 percent fall as a shock to the economy,” the development economist said, while specifying that this forecast does not take into account the cost of physical destruction.

Moreover, since 7 October Israel has withheld tax revenues on Palestinian imports and exports that it collects on the PA’s behalf, and which the Palestinian government uses to pay the salaries of its employees.

In turn, the Palestinian Authority has struggled to pay some 140,000 civil servants, who reportedly received 50 percent of their wages in October, 65 percent in November, and almost 80 percent in December.

“I’m not getting my full pay salary, the university is only paying 85 percent of it,” Birzeit professor Dr Yousef Daoud said. “Still, I consider myself lucky because I have enough income to live on.”

Alessandra Bajec is a freelance journalist currently based in Tunis.

Follow her on Twitter: @AlessandraBajec