© People line up outside a bakery in Gaza. (File photo)
The war in Gaza has wreaked unprecedented damage to the region's economy, a situation that will take tens of billions of dollars and decades to reverse, according to a new report released today by the United Nations Conference on Trade and Development.
The report's preliminary assessment of the social and economic impact of the conflict in Gaza examines the loss of gross domestic product, the time required for recovery and the lasting impact on poverty and household expenditure.
Gaza's annual gross domestic product (GDP) fell by an estimated 24 per cent year-on-year, or $655 million, last year.
The report states that for Gaza to return to a vibrant economy, the military confrontation should end immediately and reconstruction should begin immediately and in earnest. The international community needs to act now before it is too late.
The recession is accelerating
Gaza has been under lockdown since Hamas seized power in 2007, with an average growth rate of just 0.4% in 2022.
UNCTAD estimates that Gaza's economy has contracted by 4.5 per cent in the first three quarters of 2023.
Then, the military operation significantly accelerated the economic recession, causing Gaza's gross domestic product to contract by 24 per cent and per capita gross domestic product (GDP) to fall by 26.1 per cent for the whole of last year.
The report notes that if the fighting ceases immediately and reconstruction begins immediately, Gaza will not return to 2022 GDP levels until 2092, with GDP per capita and socio-economic conditions declining, following the growth trend of 2007-2022.
Even in the most optimistic scenario, i.e., 10 per cent annual GDP growth, Gaza's per capita GDP will need to return to pre-blockade levels by 2035.
The socio-economic situation is not encouraging
The Gaza Strip is one of the most densely populated places on earth, with more than 2 million Palestinians living on a tiny plot of 365 square kilometres.
The majority of the population in Gaza (80 per cent of the population) is dependent on international aid, two thirds of the population lives below the poverty line, and the pre-war unemployment rate was as high as 45 per cent. The people of Gaza lack adequate access to clean water, electricity and adequate sewage systems. In addition, much of the damage caused by previous Israeli military operations remains unrepaired.
UNCTAD noted that it would take decades to restore pre-conflict socio-economic conditions and would require substantial foreign assistance. The current military operations in Gaza have led to the displacement of 85 per cent of the region's population, stagnant economic activity, and increased poverty and unemployment.
Today, nearly 80 per cent of Gaza's workforce is unemployed, while more than 37,000 buildings – equivalent to 18 per cent of the total number of buildings in Gaza – have been damaged or destroyed.
UNCTAD said that half of Gaza's population is made up of children, and the area has become almost uninhabitable due to the lack of adequate sources of income and access to water, sanitation, health care or education services.
Break the cycle
UNCTAD warned that economic recovery was a new phase and that it was not a simple return to the pre-conflict status quo ante and that the vicious cycle of "destruction-partial reconstruction" must be broken.
The report notes that Gaza's economic constraints, stemming from 56 years of occupation and 17 years of blockade, require a thorough understanding of these factors and a practical strategy to unleash Gaza's growth potential through measures such as resuming the operation of Gaza's international airport, building a seaport and enabling the Palestinian Government to develop the natural gas fields discovered on Gaza's Mediterranean coast in the nineties of the twentieth century in order to finance the reconstruction of the region's infrastructure.
The report stresses the need for immediate support for the Palestinian Government in its efforts to prevent a wider collapse. The report also notes that total foreign aid to Gaza has been declining year on year, from $2 billion (27% of GDP) in 2008 to $550 million (less than 3% of GDP) in 2022.
Finally, UNCTAD stressed that the resolution of the Gaza crisis required an end to military operations and the lifting of the blockade, which was a crucial step towards achieving a two-State solution between Israel and Palestine.
