World Bank warns war causing ‘unparalleled’ damage to Palestinian economy

Global body notes destruction of most of Gaza’s infrastructure, predicts 3.7% contraction this year compared to pre-war prediction of 3.2% growth

Crowds of people shop in an open-air market in the southern Gaza Strip city of Khan Younis on November 28, 2023. (Mohammed Abed/ AFP)
Crowds of people shop in an open-air market in the southern Gaza Strip city of Khan Younis on November 28, 2023. (Mohammed Abed/ AFP)

WASHINGTON — The Israel-Hamas war in Gaza is having a severe impact on the Palestinian economy, the World Bank said Tuesday, adding that a sharp economic contraction is likely this year and next.

“The loss of life, speed and extent of damages to fixed assets and reduction in income flows across the Palestinian territories are unparalleled,” the World Bank said in a statement.

The conflict, now dragging into its third month, has resulted in the death of more than 18,400 people in Gaza, the majority of them women and children, according to the Hamas-run health ministry. These figures cannot be independently verified and are believed to include some 7,000 Hamas terrorists, according to Israel, as well as civilians killed by misfired Palestinian rockets. Another estimated 1,000 terrorists were killed in Israel during the October 7 onslaught.

The war was sparked by the Hamas-led massacres on October 7, when Gazan terrorists stormed the border into southern Israel and killed some 1,200 people — mostly civilians slaughtered in their homes and at a music festival — and seized 240 hostages, almost 140 of whom are still held captive in Gaza.

The UN estimates 1.9 million of Gaza’s 2.4 million people have been displaced by the war, half of them children.

UN agencies and aid groups fear the Palestinian territory will soon be overwhelmed by starvation and disease, and are pleading with Israel to boost efforts to protect civilians.

File: Palestinians displaced by the Israeli ground offensive against Hamas in the Gaza Strip set up a tent camp in the al-Mawasi area, December 7, 2023. (AP Photo/Fatima Shbair)

‘Severely impacted’

In a new analysis published Tuesday, the World Bank estimated that, as of mid-November, around 60 percent of information and communication infrastructure as well as health and education facilities had been damaged or destroyed.

And 70% of commerce-related infrastructure had been crippled or ruined.

Almost half of all primary, secondary and tertiary roads were also damaged or destroyed, and more than half a million people were living without a home due to the conflict.

Beyond the immediate human cost, the Israel-Hamas conflict has also “severely impacted the Palestinian economy,” the World Bank said.

Gaza’s contribution to the overall Palestinian economy, which includes the West Bank, had already shrunk from around 36% in 2005 to just 17% last year, according to the Palestinian Central Bureau of Statistics.

Israel’s fierce response to Hamas’s devastating onslaught on October 7 has pushed Gaza’s unemployment rate up to around 85%, while its decision to shut the door to Palestinian workers from the West Bank has put almost 200,000 people out of work.

Despite Gaza’s small contribution to the economic figures, the World Bank now expects the overall Palestinian economy to contract by 3.7% this year, down sharply from its pre-war forecast of a 3.2% increase.

Next year, the situation is expected to be even worse.

File: Palestinians open their store for shoppers at Al-Zawiya market in Gaza City on November 27, 2023. (Omar El-Qattaa/AFP)

Whereas the World Bank previously anticipated growth of 3% in 2024, it now expects an overall contraction of 6% — on the assumption that the severity of the conflict will decrease next year.

If the war drags on, the economic impact could deteriorate further.

Surge in Gaza inflation

Following the onset of the war, prices in Gaza jumped by 12%, on average, in October, the Bank said, reflecting “pent-up demand for products that are increasingly difficult to find on the local markets.”

By contrast, consumer inflation in the West Bank rose by just 0.1% over the same period.

In response to the conflict, the World Bank unveiled financial support on Tuesday to provide “emergency relief for the affected people of Gaza.”

The development lender announced an additional $20 million in funds for medical care, humanitarian needs, and financing for food vouchers and parcels in the Palestinian territory.

This comes on top of the $15 million it has already delivered, it added.

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