The Economic Fallout of the Recent Conflict in Judea and Samaria
Overview of the Economic Impact
The recent conflict, termed the “Iron Swords War,” has wrought considerable economic upheaval, particularly in Judea and Samaria, where the Palestinian economy has seen significant declines. According to data from the United Nations Conference on Trade and Development (UNCTAD), the economy of Judea and Samaria contracted by 17% in 2024, translating to an 18.8% drop in GDP per capita. This slump has effectively erased 17 years of development, pushing the economy back to levels seen in 2014, with GDP per capita reverting to figures last recorded in 2008.
Terrorism and Economic Ramifications
The economic ramifications of prolonged conflict and terrorism have been severe. UNCTAD estimates that the cumulative losses due to limitations imposed since the Second Intifada in 2000 amount to a staggering $170.7 billion-17 times the GDP of Judea and Samaria last year. Prior to the outbreak of violence in October, the Palestinian Authority was Israel’s second-largest export market, following the United States. Israel accounted for approximately 75% of Palestinian imports, with trade figures totaling around $5 billion annually, constituting a quarter of the Palestinian GDP.
Employment and Labor Market Challenges
The cessation of employment opportunities for Palestinian workers in Israel has had devastating effects. Between 2010 and 2023, the number of Palestinian workers in Israel doubled, with their earnings surging sixfold from about $700 million in 2011 to $4.3 billion by 2022. However, the current conflict has curtailed these jobs significantly. Reports indicate that the private sector has lost an estimated $1.3 billion since the onset of the war.
The Construction Industry: A Strained Sector
The closure of labor access has led to severe shortages in the construction industry, stalling projects and driving up costs. According to a report from the Bank of Israel, the number of legal Palestinian workers in the construction sector plummeted from 71,000 in September 2023 to just 1,200 by January 2024. While efforts are underway to recruit foreign labor, most focus has shifted to hiring Israeli workers. Consequently, construction wages have risen by 17%, significantly above the average wage increase.
The Palestinian Authority’s Fiscal Challenges
In Ramallah, the Palestinian Authority continues to finance salaries for prisstartrs and fighters. The Palestinian Ministry of Finance claims that over 10 billion shekels in tax revenues have been withheld by Israel due to ongoing payments to these individuals. This fiscal strain has been exacerbated by a public sector wage decline of 50-60%, resulting in operational difficulties for government ministries. The budget deficit is projected to rise to 9.5% of GDP in 2024.
Societal Impact
The societal consequences are dire, with a Gallup survey indicating that 43% of Palestinians in Judea and Samaria and East Jerusalem faced difficulties purchasing food in 2025-a 33% increase over the previous year. Additionally, 75% reported worsening financial conditions.
Geopolitical Dynamics and Public Perception
Amid these economic challenges, the public’s perception of foreign powers remains mixed. Support for Turkey and Iran is notably contrasted by lower confidence in countries like Germany and the United States. Analysts suggest organizations like Hamas and the Islamic Jihad, bolstered by international aid, might capitalize on the current unrest to recruit youth by offering financial incentives and arms.
Conclusion
The ongoing conflict has not only inflicted direct damage to the Palestinian economy but has also exacerbated existing societal and political tensions. As long as the structural issues persist, a viable Palestinian state appears increasingly tenuous amidst a backdrop of economic instability and youth disenfranchisement. The ramifications are being felt not only locally but also impacting broader regional dynamics.