The most recent report on the impact of the Middle East conflict on the Palestinian economy has been released by the World Bank showing the likelihood of a fiscal collapse.  

The report evaluates the conflict’s continuing effects on the Palestinian economy using the most recent data and analysis available, concluding that there is a far greater chance of a fiscal collapse because of the severe deterioration of the Palestinian Authority’s financial status during the past three months. 

The significant decline in economic activity coupled with the sharp reduction in clearance revenue transfers payable to the Palestinian Authority has resulted in a near-total cessation of revenue streams. The report assesses that a fiscal crisis is being caused by the rapidly growing difference between the quantity of money coming in and the amount needed to pay necessary public expenditures.

By the end of 2023, it has been assessed that there was a US$682 million financial gap. In the upcoming months, it is anticipated that this disparity will treble to reach up to US$1.2 billion. 

According to the World Bank, the Palestinian Authority’s two choices for funding are an increase in foreign aid and the accrual of further debt to vendors and public servants. Since October 2023, the Palestinian economy has lost around 500,000 jobs. 

This comprises an estimated 144,000 employment lost in the West Bank, 200,000 jobs lost in the Gaza Strip, and 148,000 jobs lost by cross-border workers moving from the West Bank to the Israeli labour market. In the middle of 2023, 32.8 per cent of Palestinians lived in poverty overall. 

There are significant distinctions between Gaza and the West Bank. The poverty rate in Gaza was about 64 per cent. Around 12 per cent was the case in the West Bank. The poverty rate in the Palestinian territories has increased by 3.7 percentage points since the last analysis of poverty was carried out in 2017.

The GDP per capita was also examined in the study. It was $3,360 in 2023, 12 [er cent less than in 2022. There was a 28 per cent decrease just for Gaza. In Gaza, the per capita income was roughly one-fifth that of the West Bank. 

Gaza’s real per capita income in 2023 was the lowest on record. Early in 2024, the Palestinian economy is still experiencing a severe shock. Although there is still a great deal of uncertainty surrounding 2024, another economic downturn of between 6.5 and 9.6 per cent is anticipated.