Gaza economy pins hopes on implementing ceasefire phase two

Gaza's economy is hanging by a thread as the second phase of the ceasefire, announced late on Wednesday, offers the only remaining hope of reviving economic activity after near total paralysis caused by Israel's ongoing military offensive.

Amid widespread destruction, a suffocating blockade, and continued Israeli control over large swathes of the enclave, farmers, factory owners and business operators say any chance of recovery hinges on Israel’s withdrawal and the implementation of the next phase of the agreement.

US envoy Steve Witkoff announced on Wednesday evening the launch of the second phase of US President Donald Trump's 20-point plan to end the war on Gaza, saying it aims to move from a ceasefire toward disarmament, the formation of a Palestinian technocratic administration, and the start of reconstruction.

For Palestinians in Gaza, however, the announcement remains little more than a promise. Failure to implement the second phase would mean the continuation of Israeli military control over around 60 percent of Gaza's territory, including most fertile agricultural land, industrial zones, factories and productive facilities.

Data from the Palestinian Central Bureau of Statistics and the Palestinian Monetary Authority show an unprecedented collapse in Gaza’s economy and living conditions. Unemployment exceeded 77 percent in 2025, as economic activity ground to a halt under Israel’s bombardment and tightened blockade, leaving most of the population without any source of income.

Farmer Khaled al-Attar, from Beit Lahia in northern Gaza, said the second phase has become a "matter of life or death". He told The New Arab that Israeli forces still control his 22 dunams of farmland, preventing him from even assessing the damage.

"I cannot return to my land or evaluate the destruction. Everything is frozen until the occupation withdraws," al-Attar said. "If the second phase is implemented, I will immediately begin reclaiming the land, because it will require enormous effort to become productive again after what it has been subjected to."

He added that Israel continues to block the entry of agricultural supplies, compounding the devastation of a sector deliberately targeted through bulldozing, burning and starvation policies. "I personally lost nearly $500,000 after my land was bulldozed and crops destroyed," he said.

Gaza’s main economic sectors have suffered catastrophic collapse. Construction activity has fallen by 99 percent, industrial production by 94 percent, and services by 82 percent. Agriculture, a cornerstone of food security, has declined by 92 percent compared with 2023, following the destruction of farmland and bans on essential production inputs.

Anwar Affana, who owned a tailoring factory in the Tel al-Zaatar area of northern Gaza, said his livelihood was wiped out entirely.

"My small factory, where I worked for years, was completely destroyed," he said. "It employed 23 workers who supported dozens of families."

Affana said the factory remains under Israeli military control, barring him from accessing the site or taking any steps toward rebuilding.

"I lost more than $700,000. There is no way to recover without an end to the offensive and the start of the second phase," he said.

Despite the devastation, Affana said he hopes to resume work if Israeli forces withdraw. "We hope we can secure raw materials and new sewing machines, if they are allowed in," he said. "The continued shutdown of factories means continued unemployment, poverty and the erosion of any remaining hope."

Labour market data underline the scale of the collapse. Labour force participation fell to just 38 percent in 2025, reflecting an almost total absence of job opportunities under siege conditions.

Abdullah Mushtaha, a board member of the Gaza Construction Industries Union, said the second phase of the ceasefire represents the only real gateway to restoring economic life. He said factory owners remain unable to access their facilities due to Israeli control.

“We are waiting for a genuine implementation of the second phase so factory owners can reach their sites and restart what can be restarted after a genocidal war that directly targeted industrial infrastructure,” Mushtaha told The New Arab.

He said more than 97 percent of factories have ceased operations, including those that had survived years of blockade, with devastating consequences for employment and income.

"We need a clear and fair compensation mechanism for factory owners," Mushtaha said. "Economic recovery without accountability and compensation will remain partial and unsustainable."