Palestinian economy faces critical downturn amid escalating fiscal crisis

2 weeks ago 16

Ramallah, occupied West Bank – The Palestinian economy is undergoing a terrible downturn, driven by Israel’s continued battle connected Gaza, intensified restrictions connected question and commercialized successful the occupied West Bank, and a crisp diminution successful some home and outer fiscal resources.

As the Palestinian authorities struggles to negociate an escalating fiscal crisis, authoritative information and adept assessments pass that the system is approaching a captious threshold – 1 that threatens the continuity of authorities institutions and their quality to conscionable adjacent basal obligations.

Withheld revenues and mounting debt

Palestinian Economy Minister Mohammed al-Amour said Israeli authorities are withholding astir $4.5bn successful Palestinian clearance revenues, describing the determination arsenic a signifier of “collective punishment” that has severely undermined the Palestinian Authority’s (PA’s) quality to function.

“The full accumulated nationalist indebtedness reached $14.6bn by the extremity of November 2025, representing 106 percent of the 2024 gross home product,” al-Amour told Al Jazeera.

The curate said the indebtedness includes $4.5bn owed to the International Monetary Fund, $3.4bn to the Palestinian banking sector, $2.5bn successful wage arrears to nationalist employees, $1.6bn owed to the backstage sector, $1.4bn successful outer debt, and $1.2bn successful different fiscal obligations.

“These pressures person had a nonstop interaction connected the wide show of the nationalist budget,” al-Amour said, contributing to a widening shortage and sharply reduced capableness to screen operational spending and indispensable commitments.

All of that has led al-Amour to reason that the Palestinian system is undergoing “its astir hard period” since the constitution of the PA successful 1994.

Official estimates amusement GDP contracted by 29 percent successful the 2nd 4th of 2025, compared with 2023, portion GDP per capita fell by 32 percent implicit the period. These figures align with a caller study by the United Nations Conference connected Trade and Development (UNCTAD), which concluded that the Palestinian system has regressed to levels past seen 22 years ago.

In response, al-Amour said the authorities was implementing an “urgent bundle of measures”.

“The authorities is rolling retired a bid of actions that see strengthening the societal extortion system, supporting citizens’ resilience successful Area C [of the West Bank], and backing tiny and medium-sized enterprises and productive sectors, peculiarly manufacture and agriculture,” al-Amour said.

Official information amusement a crisp driblet crossed astir each economical activities. Construction contracted by 41 percent, portion some manufacture and agriculture declined by 29 percent each. Wholesale and retail commercialized fell by 24 percent.

The tourism assemblage has been among the hardest hit. Following the commencement of Israel’s genocidal warfare connected Gaza successful October 2023, the Ministry of Tourism reported regular losses exceeding $2m, arsenic inbound tourism astir collapsed. By the extremity of 2024, cumulative losses were estimated astatine astir $1bn.

The Palestinian Economic Policy Research Institute (MAS), citing PCBS data, reported an 84.2 percent driblet successful edifice occupancy successful the West Bank during the archetypal fractional of 2024 compared with the aforesaid play a twelvemonth earlier. Losses successful accommodation and nutrient services unsocial amounted to astir $326m.

Despite the downturn, al-Amour said the Ministry of Economy is focusing connected sustaining the backstage sector, substituting Israeli imports crossed 7 cardinal sectors, processing the integer and greenish economies, and improving the concern environment. He noted that astir 2,500 caller companies proceed to beryllium registered each year.

Tourism collapsing

Samir Hazbun, a lecturer astatine al-Quds University and committee subordinate of the Palestinian Federation of Chambers of Commerce and Industry, said repeated crises person hollowed retired the economy.

“Over the past 5 years, each economical sectors person entered successive crises, starting with the COVID-19 pandemic and followed by the warfare connected Gaza,” Hazbun said. “Tourism, 1 of the astir important sectors, has been particularly affected, exhausting the section system and weakening its quality to recover.”

Hazbun said preliminary estimates bespeak tourism has suffered nonstop losses exceeding $1bn, alongside extended indirect losses resulting from the paralysis of hotels, souvenir shops, question agencies, circuit guides and thoroughfare vendors.

He added that edifice investments unsocial are estimated astatine $550m, with nary fiscal returns for owners, forcing galore workers retired of the assemblage owed to the lack of occupation information and information nets.

Economic adept Haitham Daraghmeh described Palestinian indebtedness arsenic “accumulated indebtedness that increases monthly”, owed to banks, suppliers, contractors, and the telecommunications and wellness sectors.

“The withholding of clearance revenues is nary longer a impermanent fiscal crisis; it has go a origin of implicit economical paralysis,” helium said.

With outer assistance frozen and home revenues astatine historical lows, Daraghmeh warned that the authorities was “no longer capable to screen salaries oregon operational costs”.

“The authorities is operating similar an ATM, with nary existent capableness for concern oregon economical stimulus,” Daraghmeh added.

Economic warnings

Daraghmeh said World Bank reports pass that continued nonaccomplishment to wage salaries and conscionable obligations could trigger broad economical collapse. While immoderate countries, including France and Saudi Arabia, person pledged support, helium said nary of that assistance has materialised.

He outlined 3 imaginable scenarios; the astir apt is simply a continued gradual decline, driven by ongoing gross withholding and shrinking resources. The 2nd involves planetary involution to forestall full collapse, peculiarly astatine a decisive governmental moment. The 3rd script could spot a conditional breakthrough, tied to European demands for fiscal reform, anticorruption measures, program changes and elections.

Taken together, the information and adept assessments suggest the Palestinian system is approaching a unsafe tipping point. Analysts pass that without an extremity to gross withholding, renewed planetary fiscal support, and a displacement successful the governmental context, the system risks sliding from prolonged situation into outright collapse.

The question facing Palestinian officials and economists alike is however agelong the strategy tin endure nether siege-like conditions – and whether governmental and economical shifts volition get successful clip to halt what galore present picture arsenic a dilatory and deliberate economical unravelling.

Read Entire Article