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Gaza's economy has shrunk to less than a sixth of its size after Israel began its war on Gaza nearly a year ago, while unemployment in the illegally occupied West Bank has nearly tripled, a U.N. report said on Thursday, underscoring the challenges of reconstruction.

The report by the United Nations Conference on Trade and Development (UNCTAD) described Gaza's economy as "in ruins" more than 11 months after Israel launched a military campaign there that has reduced much of the Strip to rubble.

The U.N. trade body said the Palestinian Authority (PA), which exercises limited self-rule under Israeli occupation in the West Bank, is under "immense pressure" that is jeopardising its ability to function.

In addition to the economic slowdown caused by Israel's war, falling international aid and revenue deductions and withholdings by Israel - which UNCTAD estimated at more than $1.4 billion since 2019 - are adding to the strain, it said.

Israel's Finance Minister Bezalel Smotrich, who ordered the funds to be withheld, accuses the PA of supporting the Oct. 7 attack on Israel. The PA denies promoting violence. Israel also routinely deducts so-called "martyr payments" paid by the PA to families of militants and civilians killed by Israeli forces.

UNCTAD called for "immediate and substantial intervention by the international community to halt the economic freefall, address the humanitarian crisis, and lay the groundwork for lasting peace and development". It also said there was a need for a comprehensive recovery plan.

The document described "a rapid and alarming economic decline" in the occupied West Bank, which has suffered a surge in violence since the Gaza war.

(Reuters)