THE Palestinian economy is undergoing a severe downturn, driven by Israel’s continued assault on Gaza, intensified restrictions on movement and trade in the occupied West Bank, and a sharp decline in both domestic and external financial resources.
As the Palestinian government struggles to manage an escalating fiscal crisis, official data and expert assessments warn that the economy is approaching a critical threshold, one that threatens the continuity of state institutions and their ability to meet even basic obligations.
A joint report by the Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA), published in the Palestinian Economic Monitor for 2025, found that the economy remained mired in deep recession throughout the year.
According to the report, gross domestic product (GDP) in Gaza contracted by 84 percent in 2025 compared with 2023, while GDP in the occupied West Bank declined by 13 percent over the period. Overall GDP levels remain far below their pre-war baseline, underscoring the fragility of any potential recovery and the economy’s inability to regain productive capacity under current conditions.
The report documented a near-total collapse of economic activity in Gaza, alongside sharp contractions across most sectors in the West Bank, despite a modest improvement compared with 2024. It also recorded a decline in trade volumes to and from Palestine compared with 2023, while unemployment in Gaza exceeded 77 percent during 2025.
Palestinian Economy Minister Mohammed al-Amour said Israeli authorities are withholding approximately $4.5bn in Palestinian clearance revenues, describing the move as a form of “collective punishment” that has severely undermined the Palestinian Authority’s (PA’s) ability to function.
“The total accumulated public debt reached $14.6bn by the end of November 2025, representing 106 percent of the 2024 gross domestic product,” al-Amour told Al Jazeera.
The minister said the debt includes $4.5bn owed to the International Monetary Fund, $3.4bn to the Palestinian banking sector, $2.5bn in salary arrears to public employees, $1.6bn owed to the private sector, $1.4bn in external debt, and $1.2bn in other financial obligations.
“These pressures have had a direct impact on the overall performance of the public budget,” al-Amour said, contributing to a widening deficit and sharply reduced capacity to cover operational spending and essential commitments.
All of that has led al-Amour to conclude that the Palestinian economy is undergoing “its most difficult period” since the establishment of the PA in 1994.
Official estimates show GDP contracted by 29 percent in the second quarter of 2025, compared with 2023, while GDP per capita fell by 32 percent over the period. These figures align with a recent report by the United Nations Conference on Trade and Development (UNCTAD), which concluded that the Palestinian economy has regressed to levels last seen 22 years ago.
In response, al-Amour said the government was implementing an “urgent package of measures”.
“The government is rolling out a series of actions that include strengthening the social protection system, supporting citizens’ resilience in Area C [of the West Bank], and backing small and medium-sized enterprises and productive sectors, particularly industry and agriculture,” al-Amour said.
Official data show a sharp drop across nearly all economic activities. Construction contracted by 41 percent, while both industry and agriculture declined by 29 percent each. Wholesale and retail trade fell by 24 percent.
The tourism sector has been among the hardest hit. Following the start of Israel’s genocidal war on Gaza in October 2023, the Ministry of Tourism reported daily losses exceeding $2m, as inbound tourism nearly collapsed. By the end of 2024, cumulative losses were estimated at approximately $1bn.
The Palestinian Economic Policy Research Institute (MAS), citing PCBS data, reported an 84.2 percent drop in hotel occupancy in the West Bank during the first half of 2024 compared with the same period a year earlier. Losses in accommodation and food services alone amounted to roughly $326m.
Despite the downturn, al-Amour said the Ministry of Economy is focusing on sustaining the private sector, substituting Israeli imports across seven key sectors, developing the digital and green economies, and improving the business environment. He noted that about 2,500 new companies continue to be registered each year.