Gaza economy on ‘verge of collapse’, says World Bank

In the absence of conflicts and multiple restrictions, Gaza’s gross domestic product (GDP) would have been about four times higher than it currently is, says World Bank

The Israeli blockade of the Gaza Strip, war and poor governance, have driven the territory's economy to the ‘verge of collapse’ and pushed its unemployment rate to the highest in the world, said a World Bank report.

In the absence of conflicts and multiple restrictions, Gaza’s gross domestic product (GDP) would have been about four times higher than it currently is, the report estimated.

The blockade, which has been in place since 2007, has slashed Gaza’s GDP by 50 per cent. It has also exacerbated the unemployment situation, leading to the highest level of joblessness in the world at 43 per cent overall, and 60 per cent among its youth at the end of 2014.

“Gaza’s unemployment and poverty figures are very troubling and the economic outlook is worrying. The current market in Gaza is not able to offer jobs leaving a large population in despair particularly the youth,” said Steen Lau Jorgensen, World Bank Country Director for West Bank and Gaza. “The ongoing blockade and the 2014 war have taken a toll on Gaza’s economy and people's livelihoods. Gaza’s exports virtually disappeared and the manufacturing sector has shrunk by as much as 60 per cent. The economy cannot survive without being connected to the outside world.”

Last year’s Israeli offensive on Gaza left more than 2,200 Palestinians, mostly civilians, dead and displaced half a million more. The impact on one of the most densely populated areas in the world has also damaged or destroyed 96,000 Palestine homes, leading to a crisis of homelessness.

The 2014 war is estimated to have reduced Gaza’s GDP by around $460m. Today, its real GDP is a couple of percentage points higher than it was 20 years ago in 1994, in contrast with a population growth of about 230 per cent during the same period, according to the World Bank. This has resulted in a 31 per cent decline in real per capita income since 1994.

Sectors of the economy hit the hardest were construction, agriculture, manufacturing, and electricity, with output drops of 83 per cent in construction during the second half of 2014 and approximately 50 per cent in the other sectors. Gazans continue to suffer from poor access and quality of basic public services such as electricity, water, and sewerage, with around 80 per cent receiving some form of social assistance and nearly 40 per cent falling below the poverty line.

“Even more shocking is the reality that most of Gaza’s 1.8 million residents are confined to an area of 160 km2 and are not able to travel beyond this area without permits,” said Jorgensen. The Washington-based Center for Mind-Body-Medicine estimates one third of Gaza’s children showed signs of post-traumatic stress disorder even before the 2014 armed conflict, Jorgensen said.

Improvement in the situation is dependent on easing of the Israeli blockade to allow reconstruction materials to flow into the strip in sufficient quantities and to lift the exports out, as well as donor financing for reconstruction, the World Bank said.

The international body has been monitoring the disbursement rate of donor pledges, which currently stands at 27.5 per cent. As of May 18, the UN agency for Palestine refugees UNRWA confirmed 137,661 Palestine refugee houses were impacted by last year’s hostilities, with some totally demolished and others suffering various degrees of damages.

Since the announcement of a ceasefire nine months ago, not a single totally destroyed home has been rebuilt in Gaza, according to UNRWA. The agency has so far only received funding to rebuild 200 of the 9,161 Palestine refugee homes that have been deemed completely destroyed.    

Photo credit: World Bank