It is intrinsic to warfare that economic assets are destroyed, but conflicts usually don’t generate economic devastation on the scale inflicted in Gaza.

The value of economic activity in Gaza in the first quarter of 2024 was 86 percent below pre-war levels, with studies from both the World Bank and the United Nations Commission on Trade and Development describing its economic collapse.

‘Since October 7, the Palestinian economy experienced one of the largest economic shocks ever recorded in recent economic history’, the World Bank report concluded.

By way of comparison, International Monetary Fund (IMF) figures show that Ukraine’s economy fell 29 percent in 2022 following Russia’s assault. One academic study estimated Germany’s economy contracted 64 per cent and Japan’s economy 52 percent during World War II.

The influx of relatively high-spending American and allied soldiers meant the economies of both Afghanistan and Iraq achieved modest economic growth from 2003 onwards, according to the IMF economic database, despite the human suffering. Afghanistan’s economy contracted 20 percent in 2022, after the US withdrawal. The 2014 war in Gaza resulted in a 38 percent fall in its GDP.

The World Bank estimated that by the first quarter of 2024, 82 percent of private sector establishments in Gaza had been damaged or fully destroyed. The impact on social infrastructure is similar, with around 84 percent of health facilities and schools damaged or destroyed.

Between 80 and 96 percent of agricultural assets had been hit by early this year, including irrigation infrastructure, livestock, orchards, machinery, storage and research stations. The World Bank noted that this had left those reliant on agricultural food chains without dependable food or income. Before the conflict, agriculture and the associated food-chain contributed 15 percent of GDP across both Gaza and the West Bank.

Estimates of GDP reported by the United Nations Conference on Trade and Development show that Gaza generated value-added equivalent to an average of US$670 million a quarter in the three years before the conflict. This dropped to US$129 million in the third quarter of 2023 and US$92 million in the first quarter of this year.

A sectoral breakdown for the fourth quarter of 2023 shows a 96 percent fall in construction, 93 percent fall in agriculture, 77 percent fall in services and 92 percent fall in the industrial sector.

Palestine has long had high levels of poverty. By 2022, 80 percent of Gaza’s people depended on some level of international assistance, while aid was the primary source of income for more than half of households. A third of people across both Gaza and the West Bank lacked secure food supplies.

Including both the West Bank and Gaza, Palestine’s annual GDP per capita before the war was equivalent to US$3800 a year, according to World Bank data, ranking between the Philippines and Vietnam. The territory nevertheless has high literacy levels of 97.5 percent, while life expectancy before the conflict was 75.5 years, ranked between Mexico and Hungary.

By the start of this year, three quarters of Gaza’s people had been internally displaced and lacked secure shelter, with shortages of water, fuel, electricity and access to sanitation.

Gaza now depends heavily on material aid flows through UN agencies. However, these are greatly restricted. The United Nations reports that, before the conflict in 2023, 500 trucks entered Gaza daily, while, in the first two weeks of September 2024, only 166 were permitted to make the crossing.

Although suffering nothing like the economic collapse in Gaza, the West Bank Palestinian territory is also confronting a sharp downturn, with GDP in the fourth quarter of 2023 down 19 percent on the previous quarter. Virtually all private sector businesses in the West Bank are reporting a decline in sales. And 42 percent saying the number of employees reporting to work has fallen, reflecting greater restrictions on movement.

Before the conflict, 22 percent of West Bank Palestinians worked in Israel or in Israeli settlements. However, 90 per cent of those workers have now lost their jobs and unemployment in the West Bank has risen from 12.9 per cent to 32 per cent as a result. The Palestinian Authority is heavily in arrears in payments to public sector employees.

The United Nations estimates that the destruction in Gaza has left 42 million tonnes of debris, which Bloomberg calculated would take a line of dump trucks stretching from New York to Singapore to clear.

The Israeli government is promoting the idea of a futuristic Gaza free trade zone modelled on Singapore once the war is over. Reconstruction would be supervised by Saudi Arabia, UAE, Egypt, Jordan and Morocco, with a target completion date of 2035. The territory would be administered by Israel, Egypt and a Palestinian Rehabilitation Authority.