Sally Ibrahim
The New Arab / March 29, 2026
The Palestinian economy has been severely hit by Israel’s war on Gaza and its increasingly brutal occupation of the West Bank.
The Palestinian economy has suffered a sharp decline over the past two years, shrinking by nearly 20% compared to the period before Israel’s genocidal war on Gaza at the end of 2023, according to a report released Sunday by the Palestinian Central Bureau of Statistics (PCBS).
While limited growth was reported in 2025, the recovery remains fragile and uneven, highlighting stark regional disparities.
The report shows that the economy grew by 3% in the last quarter of 2025 compared to the same period in 2024, largely driven by the information and communications sector, industry, and services.
These gains, however, only partially offset the long-term recession caused by war and movement restrictions.
Disparities between the West Bank and Gaza remain striking. The PCBS reported that the West Bank’s GDP reached US$3.039 billion in the last quarter of 2025, while Gaza’s barely hit US$176 million.
Per capita GDP rose slightly to US$596 at constant prices, a 1% increase from the same period in 2024, yet this small gain does little to improve living conditions in Gaza, where residents continue to face the repercussions of war and blockade.
Over the course of 2025, the Palestinian economy grew by 4% compared to 2024, but it remains roughly one-fifth below its pre-war level. This underlines the continued effects of the conflict and economic disruption across multiple sectors.
Quarterly data reveals uneven growth: services rose 11%, the information and communications sector climbed 12%, and industry increased 6%.
In contrast, transport and storage fell 11%, construction fell 10%, financial and insurance activities fell 5%, and agriculture, forestry, and fishing fell 4%.
Economists point to damaged infrastructure in Gaza, movement restrictions, and the enduring blockade as key factors behind these imbalances.
“The growth in 2025 is important, but it does not compensate for the losses the economy suffered during the war. The gap between the West Bank and Gaza is widening, and urgent support is needed to rebuild infrastructure and empower productive sectors in Gaza.” Palestinian economic analyst Samir Abu Mdallallah told The New Arab.
He said that the Palestinian economy’s reliance on remittances and external financing makes it vulnerable to regional instability and trade restrictions, which could further hamper growth in coming years.
In Gaza, the economic situation remains dire. Despite slight improvements in some prices and services, unemployment remains high, markets are limited, and daily life is extremely difficult.
Widespread damage to factories, destruction of farmland, and the long-term effects of war and blockade continue to leave families in precarious conditions.
The report comes at a time when Palestinians are seeking ways to stabilize their economy amid a long cycle of crises, including repeated wars, ongoing blockades, and internal political divisions.
Abu Mdallallah stressed that international and regional support will be critical for any sustainable recovery and meaningful economic growth.
“The limited recovery in some sectors shows potential, but it cannot replace the structural losses experienced over the past years,” he said. “Without a focused strategy and investment in Gaza, economic disparities will only deepen, threatening social stability and development.”
In 2026, Palestinians face the dual challenge of reviving their economy while managing the social and political fallout from years of conflict, according to Abu Mdallallah.
“For residents in Gaza, each small gain remains fragile, while in the West Bank, modest growth masks deeper vulnerabilities tied to regional dynamics and ongoing occupation,” he said.
Sally Ibrahim is The New Arab’s correspondent from Gaza
