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The Gaza war has devastated the economies of both the embattled Gaza Strip and the occupied West Bank, the International Monetary Fund's chief said Sunday, adding that only "durable peace" would improve the outlook.

"The Palestinian economy's dire outlook is worsening as the conflict persists," managing director Kristalina Georgieva told the World Governments Summit in Dubai.

"Only a durable peace and political solution will fundamentally change it".

"Economically, the impact of the conflict has been devastating," Georgieva said.

In the war-ravaged coastal territory, economic activity dropped 80 percent from October through December compared with a year earlier, the IMF chief said.

In the West Bank, the drop was 22 percent, she added.

The larger Palestinian territory has been hit hard by Israel's withdrawal of 130,000 work permits, the proliferation of checkpoints that has heavily disrupted transportation, the loss of tourism, being cut off from Gaza and Israel's withholding of tax revenues from the Palestinian Authority.

The Gaza Strip has been under intense Israeli assault for over four months, since the October 7 Hamas attack on southern Israel.

Hamas' surprise attack resulted in the deaths of about 1,160 people, according to an AFP tally based on official Israeli figures. The group took more than 250 hostages too. It says the attack came in response to decades of Israeli aggression against the Palestinians.

Vowing to destroy the Palestinian group, Israel's unprecedented bombardment has killed over 28,000 people, mostly women and children.

In-depth: Restrictions on movement, revoked permits, and military raids have left the West Bank's economy on the brink of collapse

How Israel's war on Gaza is strangling the West Bank's economy ⬇️

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Georgieva spoke at the opening of the World Government Summit, an annual gathering of top business and political figures in the United Arab Emirates, which runs until Wednesday.

Beyond the Palestinian territories, Gaza's war has also hit the tourism sectors of neighbouring countries such as Egypt and Lebanon, she said.

Meanwhile, attacks on commercial shipping by Yemen's Houthi rebels, which the group says are in solidarity with Palestinians in Gaza, is leading to "rising freight costs and reduced Red Sea transit volumes (which are) down by nearly 50 percent this year in our PortWatch data," Georgieva said in her speech.

For the Middle East and North Africa region as a whole, GDP growth is expected to improve from last year but will likely fall below earlier IMF projections, partially because of the Gaza war, the fund reported in its latest forecast last month.

The IMF now sees the economies of the region expanding 2.9 percent this year, a decrease of half a percentage point from its October forecast.