Gaza economic recovery could take decades: UN report

The preliminary assessment of the social and economic impacts of the conflict examines Gross Domestic Product (GDP) loss, recovery timelines and the enduring effects on poverty and household expenditure.

It is estimated the annual GDP of Gaza declined by $655 million last year, equivalent to 24 per cent.

"If Gaza is to remerge with a viable economy, the military confrontation should end immediately, and reconstruction should begin in earnest and without delay. The international community needs to act now before it is too late," the report recommended.

Accelerated economic decline

Gaza has been under blockade since 2007, after Hamas seized power, and had an average growth rate of 0.4 per cent through 2022.

UNCTAD estimated that the economy had already contracted by 4.5 per cent in the first three quarters of 2023.

“However, the military operation has greatly accelerated the decline and precipitated a 24 per cent GDP contraction and a 26.1 per cent drop in GDP per capita for the entire year,” it said.

The report found that if fighting were to stop immediately with reconstruction starting right away, and the 2007-2022 growth trend persists, it would take until 2092 just to restore the GDP levels of 2022, with GDP per capita and socioeconomic conditions declining.

“However, even with the most optimistic scenario that GDP could grow at 10 per cent annually it would still take Gaza’s GDP per capita until 2035 to pre-blockade level of 2006.”

Dire socioeconomic conditions

Conditions were already dire in the Gaza Strip, which is one of the most densely populated places on the planet, with more than two million Palestinians confined to 365 square kilometres, or 141 square miles.

The majority, 80 per cent, relied on international aid; two-thirds of the population lived below the poverty line, and unemployment stood at 45 per cent before the war. People lacked adequate access to clean water, electricity and a proper sewage system. Additionally, much of the damage from previous Israeli military operations remained unrepaired.

Restoring pre-conflict socioeconomic conditions will take decades and requires substantial foreign aid, UNCTAD said, noting that the ongoing military operation has displaced 85 per cent of Gaza's population. Economic activity has ground to a halt, and poverty and unemployment have deepened.

Today, nearly 80 per cent of the labour force is unemployed, while some 37,379 buildings — equivalent to 18 per cent of total structures in Gaza — have been damaged or destroyed.

“The Gaza Strip, half of whose population are children, is now rendered almost uninhabitable with people lacking adequate sources of income, access to water, sanitation, health or education,” UNCTAD said.

Break the cycle

The UN agency warned that a new phase of economic rehabilitation cannot simply mean a return to the pre-conflict status quo and “the vicious circle of destruction and partial reconstruction” must be broken.

“Gaza’s economic constraints, rooted in 56 years of occupation and a 17-year blockade, necessitate thorough understanding and realistic strategies to unlock its growth potential through measures that include restoring the Gaza International Airport (today inoperable), building a seaport and enabling the Palestinian government to develop the natural gas fields discovered in the 1990s in the Mediterranean Sea off the shore of Gaza to help finance the reconstruction of infrastructure,” it said.

The report also emphasized the importance of providing immediate support to the Palestinian government in efforts to prevent a wider collapse, noting that foreign aid declined from a total of $2 billion, or 27 per cent of GDP, in 2008, to $550 million in 2022, or less than three per cent of GDP.

UNCTAD further underscored that resolution of Gaza's crises requires ending the military operation and the lifting of the blockade, as pivotal steps toward realizing a two-State solution between Israelis and Palestinians.