How Siege and War Crushed Gaza’s Economy and Future

Limited relief has been allowed in recent months, with a brief relaxation of restrictions in May, but access has been scant, and access points have turned deadly.

The quickest path was sealed again yesterday, and Israeli forces have killed hundreds who attempted to reach it, news outlets and human rights groups widely reported.

With more than 55,000 Palestinians killed and accusations of genocide piling up, Gaza is on an emergency footing that has been formed not only by recent events but by almost 20 years of economic blockade.

Gaza’s economic collapse, explains British-Palestinian economist Zayne Abudaka, a senior fellow at the Institute for Social and Economic Progress in Ramallah, is a long-damaged system that has atrophied since the blockade that the Israelis enforced upon Hamas’s takeover of the strip in 2007.

From stability towards the collapse of the economy
Gaza’s economy was a lot more functional before the blockade, even with the occupation. Palestinians used to move freely, start businesses, and cultivate land with few restrictions, Abudaka said.

There was no political freedom, but there was mobility and resources. International assistance poured in after the Oslo Accords, and more positions were added in the public sector of the fledgling Palestinian  genocide Authority.

This change lured much of the population away from agriculture and industry. In 1996, industry was more than 20 percent of the Palestinian territories’ gross domestic product; today, it’s about 10 percent.

The 2000-second intifada was a huge turning point. With curfews and sieges, along with widespread destruction, the Palestinian economy lost an estimated 40 percent of its GDP in a year. By 2007, the full blockade sealed Gaza from most trade and investments, hastening its downward spiral.

A Population Trapped by Dependency
The blockade imposed harsh limits on even basic items like baby bottles and water pumps. Gaza, with its densely populated center of 2.3 million people spread over a mere 360 sq km, displaced farmland and overloaded the once productive agricultural zones.

“Unemployment among young people is at 66 percent,” adds Abudaka. “The economy was asphyxiated and productive sectors abandoned to collapse.” By 2022 the average real GDP per capita in Gaza had decreased by more than 27% compared to 2006. In 2006, 63 percent of Yemenis needed help; today, almost the entire population relies on it to survive.

They were followed by the West Bank more moderately so. Palestinian banks have no national currency and use four others, including the Israeli shekel.

However Israel has financial channels and tax collection in hand, so it is difficult for Palestinian institutions to operate.  Iran Israel collects customs taxes on behalf of the Palestinian Authority but withholds them for subjective reasons, including alleging missing receipts and imposing fees.

No Future in Sight
Finance Minister Bezalel Smotrich is supposedly seeking to halt all PA transfers. This is part of a larger strategy to transform the PA into a body that controls the Palestinians without providing them with any real services, according to Abubakar.

“Many young Palestinians have lost hope because of this level of control,” he says. “They adore their homeland, but they feel it has no future. For years, we’ve held the line — but this can’t continue indefinitely.”

What’s happening here in Gaza is not just a humanitarian catastrophe, it’s the catastrophic collapse of an economy under siege.