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The World Bank has warned about the devastating economic toll of Israel's ongoing war in Gaza, describing the crisis as "unprecedented".

According to a recent report from the financial authority, the Palestinian economy is expected to shrink by 26 percent in 2024, marking the sharpest contraction in two decades.

Gaza continues to bear the brunt of the economic collapse, with its economy shrinking by 85 percent in the first half of the year.

In stark contrast, the occupied West Bank’s economy contracted by 23 per cent over the same period, driven by mobility restrictions, a strained labour market, and weakened consumer demand.

'Unprecedented level of economic hardship'

Gaza's per capita income has plummeted from $2,328 in 1994 to under $200 today, reflecting deepening poverty and disparity.

"The ongoing conflict in the Middle East continues to have a catastrophic impact on the�� Palestinian economy, pushing the territories into a crisis of unprecedented magnitude," the World Bank statement said.

"The continuation of the hostilities has led to a sharp reduction in economic output and a collapse of basic services in both the West Bank and Gaza, amid skyrocketing poverty across the territories."

The ongoing war has caused a catastrophic price surge, further straining household budgets. Food costs have risen by 448 per cent since October 2023, while fuel prices have more than tripled.

Supply chain disruptions and looting have exacerbated food insecurity, with the report warning of “unprecedented levels” of hardship in accessing basic goods. ��

"The conflict has entered its second year. Palestinians continue to endure an unprecedented level of trauma, violence, economic hardship and uncertainty," the report said.

Total collapse in Gaza

Infrastructure destruction has added to a total collapse in Gaza. The collapse of telecommunications systems has led to widespread internet and mobile service outages, disrupting emergency services and civilians' daily lives.

The annihilation of essential infrastructure has compounded the region’s humanitarian crisis, pushing vital services like healthcare, electricity, and water to the brink of collapse. ��

Israel has destroyed 93 per cent of bank branches and ATMs are no longer operational, with 33 of 57 head offices completely out of service.

"A deepening cash liquidity shortage has reduced purchasing power, leading to black-market withdrawals with high commissions," the World Bank said.

Unemployment has surged as Gaza’s private sector suffers immense damage. An estimated 88 percent of businesses in Gaza have been destroyed or severely damaged, further crippling economic activity.

With wages plummeting and costs soaring, households are struggling to cope. Acute shortages of cash and basic commodities have left Gaza’s markets paralysed, while monopolies have exacerbated price hikes. ��

The World Bank reported that Gaza’s economic downturn has widened the income disparity with the occupied Palestinian territories and drastically reduced its overall output.

While official data beyond mid-2024 remains unavailable, high-frequency indicators show no signs of improvement in recent months, the report claimed.

Israel’s war in Gaza has claimed the deaths of over 45,000 Palestinians and injured more than 106,000.

Nearly 1.9 million people - 90 percent of Gaza’s population - have been displaced. The devastation has surpassed the economic impacts of previous crises, including the Second Intifada and the Covid-19 pandemic. ��

The Palestinian Authority (PA) faces mounting fiscal challenges, with financing needs reaching $1.04 billion by October 2024.

Israel’s deductions from clearance revenues, coupled with declining aid, have forced the PA to cut public sector salaries by 30 to 40 per cent since the start of the war. This has weakened household spending, exacerbated social unrest, and increased reliance on borrowing from domestic banks.��