The World Bank says Gaza’s economy is on the ‘verge of collapse’

Ruins of houses in Beit Hanoun in the northern Gaza Strip.
Ruins of houses in Beit Hanoun in the northern Gaza Strip. Reuters/Suhaib Salem

Gaza’s economy is teetering on the verge of collapse, says a report released Friday by the World Bank. Unemployment rates on the coastal strip are now the highest in the world and this has far-reaching ramifications across society.


“It’s like a big prison and in a big prison you will have no business,” said Shawan Jabarin, the general director of the West Bank’s human rights organisation Al-Haq. “Now a whole generation in Gaza is looking for their future, underground by building tunnels.”

Jabarin says Gaza is in a moment of explosive catastrophe and that the combined impact of three wars over six years has destroyed not only the economy but Gaza’s social fabric, evidenced even in statistics like rising divorce rates and domestic violence.

The World Bank found that nearly 40 per cent of the territory's residents fall below the poverty line, despite nearly 80 per cent of Gaza's residents receiving some aid.

"These numbers, however, fail to portray the degree of suffering of Gaza’s citizens due to poor electricity and water/sewerage availability, war-related psychological trauma, limited movement and other adverse effects of wars and the blockade,” said the report.

Published the week ahead of the bi-annual meeting in Brussels of the Ad Hoc Liaison Committee, which coordinates international donor support for the Palestinians, the report portrays a devastating picture of a society cut off from the world.

Exports have virtually disappeared and the job market has also crashed, leaving 43 per cent of Gaza’s 1.8 million people unemployed.

For youth, the statistics are even more alarming. Unemployment in this group reached 60 per cent by the end of last year and in a crumbling job market they face a dearth of opportunities.

“We know from around the world that especially if you have very high youth unemployment among males that this is not a recipe for peace and stability,” Steen Lau Jorgensen, the World Bank’s country director for Gaza and the West Bank, told RFI.

The World Bank has pointed to a combination of three factors behind Gaza’s deep-seated economic woes, including poor governance, blockades and repeated conflicts.

Israel’s blockade, put in place since 2007 when Hamas took over the Palestinian territory, and more recently Egypt, has also slashed Gaza’s gross domestic product in half.

However, Israel says the blockade is necessary to prevent Hamas from smuggling in weapons or materials used to dig tunnels into Israel.

But without the conflicts and multiple restrictions on movement of goods and people, Gaza’s GDP could have been about four times higher than it currently is today.

The closure of smuggling tunnels with Egypt and the 50-day 2014 war between Hamas and Israel, which killed more than 2,200 Palestinians and 72 Israelis, have also made the economic situation more acute.

The conflict, which ravaged Gaza’s infrastructure, cut its GDP by about 460 million dollars (417 million euros), leading to a 15 per cent contraction of its overall GDP.

Jabarin says that the situation will only worsen unless the siege is lifted or political unity between the West Bank and Gaza is reached.

Jorgensen agrees, and emphasises that securing economic development in the future can only begin with prompt reconstruction and the ability for much-needed materials to enter Gaza, a sealed-off area of some 160 square kilometres.

“There’s no doubt that this has to start with opening up trade and movement for people and goods and no economy can grow under a blockade,” Jorgensen said, while cautioning that the legitimate safety concerns of neighbouring countries must also be addressed.

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