Is the West Bank's economy on the cusp of collapse?

Rafi Schwartz, The Week US
·4 min read
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Photo collage of two halved of an olive tree. On the left, the tree is a burnt, ashy stump, with Israeli soldiers standing next to it. The image is tinted red. On the right, a flourishing olive tree is being harvested by two Palestinian men. The image is tinted green.
Photo collage of two halved of an olive tree. On the left, the tree is a burnt, ashy stump, with Israeli soldiers standing next to it. The image is tinted red. On the right, a flourishing olive tree is being harvested by two Palestinian men. The image is tinted green.

It's been nearly half a year since Israel launched its still-ongoing siege of the densely populated Gaza Strip, killing tens of thousands of people and galvanizing the world's attention on this latest eruption of violence in the region. The conflict between Israel and Hamas — precipitated by the Palestinian militant group's unprecedented attack on southern Israel on Oct. 7 — has become a major global flashpoint and threatened to spill across the broader Middle East. At the same time, there is perhaps nowhere on earth outside of Gaza and Israel where the effects of the ongoing conflict are being as acutely felt as in the West Bank by the Palestinians living under Israeli occupation there.

Of the many ways the war in Gaza is affecting life in the West Bank, one of the most pressing is the economic impact on a territory whose financial prospects are in many ways inextricably tied to its occupation. With limited avenues for unimpeded economic growth even before this past fall, the West Bank has spent several months watching its economy strained further than any time in recent memory.

With collapse a growing possibility, and long-term solutions nebulous, where does the West Bank economy stand today, and where might it go from here?

What did the commentators say?

Since Oct. 7, the Palestinian economy has "experienced one of the largest shocks recorded in recent economic history" the World Bank said. While much of the downturn has been in Gaza, the West Bank's GDP dropped 22% in the fourth quarter of 2023, with poverty rising due to a "marked economic slowdown and constrained fiscal capacity, which affects the effectiveness of social protection programs." Nearly a quarter of employment in the West Bank "has also been lost," U.N. Development Program Assistant Secretary-General Abdallah Al Dardari told The Associated Press. It's the "equivalent to 208,000 jobs," he said, while the West Bank is responsible for more than 80% of the total Palestinian GDP.

Produce sales are down nearly 50%, one Ramallah-area grocer told Al Jazeera in October, explaining the "great difficulties transporting produce." Shipping from Israel has become increasingly "expensive in terms of gas and the time it takes for them to arrive."

In particular, Israel's move to cancel work visas for more than 170,000 Palestinians in the West Bank has alarmed observers, including U.S. Treasury Secretary Janet Yellen. She urged Israeli Prime Minister Benjamin Netanyahu to reverse the move and ease other financial constraints on the territory in a letter late last month, and described these actions as "vital for the economic well-being of Palestinians and Israelis alike" during a press conference at a recent G20 meeting of finance ministers.

Israel has also been withholding some tax revenue funds collected from the West Bank, and traditionally "distributed back to the Palestinian Authority, which used it to fund its operating budget," The New York Times said. Israel collects the import taxes because the Palestinian Authority "does not control its own borders," said The Economist, and those funds "account for 64% of [the PA's] total revenue." Israel's current policy of withholding some tax revenue from the West Bank has dealt a "mortal blow to the PA's economy," Haaretz's editorial board said. As an occupying entity, Israel has an "obligation to maintain stability in the West Bank, as well as an interest in doing so," it continued, noting the loss of more than $800 million in domestic monthly revenue caused by the absence of Palestinian workers. Ultimately, the board argued, Israel should allow a "controlled entry of Palestinian workers" that, while mutually beneficial, will most importantly "enable West Bank Palestinians to earn a dignified living."

What next?

Looking ahead, there is hope the West Bank's once thriving IT sector can "buck the wider trend of economic slowdown across the Palestinian territories," Context said, even as firms initially saw business "grinding to a halt" in the war's early stages.

More immediately, Yellen welcomed the news that some frozen tax revenues from Palestinians in the West Bank have "started to flow" back into the territory to "fund basic services and to bolster the economy in the West Bank."