[MIDDLE EAST] The West Bank, a territory at the heart of the Israeli-Palestinian conflict, is facing an unprecedented economic crisis that threatens to push it over the edge into full-scale collapse. As the conflict in Gaza continues to rage, the ripple effects are being felt acutely in the West Bank, where a combination of factors has led to a dire economic situation that experts warn could have far-reaching consequences for regional stability and the lives of millions of Palestinians.
The Economic Freefall
Plummeting GDP and Rising Unemployment
The Palestinian economy has been in a state of free fall since the outbreak of hostilities in October 2023. According to the latest data from the United Nations Conference on Trade and Development (UNCTAD), the West Bank's Gross Domestic Product (GDP) contracted by a staggering 19% in the fourth quarter of 2023, resulting in an overall annual decline of 1.9%. This sharp downturn has had a devastating impact on the labor market, with unemployment rates skyrocketing from 12.9% before the conflict to 32%.
The human cost of this economic decline is staggering. An estimated 306,000 jobs have been lost in the West Bank alone, translating to a daily labor income loss of $25.5 million. This massive erosion of economic opportunity has left countless Palestinian families struggling to make ends meet and has exacerbated existing social hardships.
The Collapse of Business and Trade
The economic crisis has not spared the business sector, with 96% of West Bank businesses reporting decreased activity and 42.1% reducing their workforce. The impact is particularly visible in East Jerusalem, where 80% of businesses in the Old City have either partially or completely ceased operations. This widespread business disruption has not only affected local economies but has also contributed to the overall economic decline of the region.
Trade, a vital component of the Palestinian economy, has been severely disrupted due to increased restrictions on the movement of people and goods. The number of checkpoints across the occupied West Bank rose from 567 in early October 2023 to 700 by February 2024, significantly hindering economic activity. These restrictions have created a chokehold on the West Bank's economy, making it increasingly difficult for businesses to operate and for goods to reach markets.
The Human Cost of Economic Collapse
Poverty and Food Insecurity
The economic crisis has led to a sharp increase in poverty and food insecurity across the West Bank. By 2022, one-third of the Palestinian population (1.84 million people) was already food insecure or severely food insecure, and 31.1% lived in poverty. The current crisis has only exacerbated these issues, with poverty now affecting nearly the entire population of Gaza and rising rapidly in the West Bank.
The impact on families has been devastating. Yaqoub, a 29-year-old father of two young daughters from Nahalin, a Palestinian village near Jerusalem, shared his struggle: "We have sold all our gold and jewelry. It was devastating to ask my wife to do that. I believe we can survive on our savings for another two months, but beyond that, I have no idea what our next steps will be."
The Youth Crisis and Radicalization
The lack of economic opportunities has hit the younger generation particularly hard. In refugee camps established after Israel's creation in 1948, which still resemble slums today, young men have expressed that militant organizations like Hamas and Palestinian Islamic Jihad are their only sources of employment. This dire situation raises concerns about the potential for increased radicalization among Palestinian youth, further complicating efforts for peace and stability in the region.
The Role of Israeli Policies
Restrictions and Collective Punishment
Israel's policies in the West Bank have played a significant role in the current economic crisis. Following the Hamas attacks on October 7, Israel barred around 140,000 Palestinian workers from the West Bank from entering Israel. Only a small number of those workers have been reinstated, leaving a massive gap in the Palestinian labor market and depriving families of crucial income.
Tahani Mustafa, a senior analyst with the Crisis Group think tank, explains the complex dynamics at play: "Tactics of both reward and punishment have been employed by all Israeli administrations concerning the PA, but the current government is implementing particularly contradictory strategies. Israel relies on the PA to uphold security in the West Bank and safeguard settlers, yet they are exploiting their position. There is also a logic of collective punishment at play: despite historical failures, there seems to be a belief that imposing an economic blockade and restricting movement will compel compliance."
Financial Pressure on the Palestinian Authority
The Israeli government has also taken steps to exert financial pressure on the Palestinian Authority (PA). Bezalel Smotrich, Israel's far-right finance minister, has been withholding tax revenues to the PA as a form of punishment for its collaboration with the international court in The Hague. This action, combined with reduced international aid, has put severe strain on the PA's finances and its ability to provide essential services to the Palestinian population.
The International Response and Future Prospects
The Need for International Aid
The dire economic situation in the West Bank has prompted calls for increased international support. Pedro Manuel Moreno, the deputy secretary-general of UNCTAD, has urged the global community to intervene to stop this economic decline, tackle the humanitarian crisis, and establish a foundation for enduring peace and development3.
However, the path to recovery is fraught with challenges. Mutasim Elagraa, who oversees UNCTAD's aid efforts for Palestinians, noted, "To restore Gaza to its pre-October 2023 status, we would require tens of billions of dollars, if not more, and several decades." The long-term goal of guiding the Palestinian territories towards sustainable development will require significant time, resources, and political will from both regional actors and the international community.
The Risk of Further Instability
The economic crisis in the West Bank poses a significant risk to regional stability. As poverty and unemployment continue to rise, there is a growing concern about the potential for increased unrest and violence. The situation is particularly volatile in refugee camps and areas where economic opportunities are scarce, raising the specter of a new generation turning to extremism out of desperation.
The economic crisis in the West Bank has reached a critical point, threatening not only the livelihoods of millions of Palestinians but also the prospects for peace and stability in the region. As businesses struggle to survive, unemployment soars, and poverty becomes increasingly widespread, the need for a comprehensive and coordinated response has never been more urgent.
Addressing this crisis will require a multi-faceted approach, including the easing of restrictions on movement and trade, increased international aid, and a renewed commitment to finding a lasting political solution to the Israeli-Palestinian conflict. Without swift and decisive action, the West Bank risks sliding further into economic collapse, with potentially dire consequences for both Palestinians and Israelis alike.
As the international community grapples with this complex issue, the words of those directly affected, like Nader, a 47-year-old business owner in Hebron, serve as a poignant reminder of what's at stake: "My family has been in this business for over 70 years, and I do not wish to see it shut down while I am still here." The future of the West Bank, and indeed the entire region, may well depend on how quickly and effectively this economic crisis can be addressed.
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