Gaza unemployment rate surges to 80% and economy shrinks by 85% in 12 months of war

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Gaza’s unemployment rate has surged to nearly 80 per cent and its economy contracted by almost 85 per cent during the past 12 months of Israeli bombardment, according to a new report.

The occupied West Bank’s economy also suffered, with unemployment levels reaching 34.9 per cent and the economy shrinking by 21.7 per cent between early October last year and the end of September 2024, compared to the previous period, the International Labour Organisation said in a report on Thursday.

The overall unemployment rate in the Occupied Palestinian Territory, comprising Gaza and the occupied West Bank, climbed to an average of 51.1 per cent, with the real gross domestic product plunging by an average of 32.2 per cent during the period.

“This contraction in real GDP is unprecedented in the [Occupied Palestinian Territory’s] recent history,” the International Labour Organisation said. “Even during the most severe economic downturn of the second Palestinian uprising against Israeli occupation in 2001, real GDP fell by 14.9 per cent, less than half the scale of the current decline.”

The continuing Gaza war has devastated Palestine’s economy, with infrastructure, housing and schools destroyed. More than 42,000 people have died, with thousands more injured, since the war broke out between Hamas and Israel on October 7.

It is expected to take decades to repair the damage to Palestine's economy, with the scale of devastation far surpassing the impact of conflicts in 2008, 2012, 2014 and 2021, UN Trade and Development said in a report last month.

Damage to critical infrastructure in Gaza in the first four months of the Israeli bombardment was estimated at $18.5 billion, a joint report by the World Bank and the UN said in April.

In the first half of 2024, Gaza's GDP fell by nearly 86 per cent due to Israel’s attacks, while the occupied West Bank's first-half GDP declined 25 per cent, the International Monetary Fund said this month.

“The impact of the war in the Gaza Strip has taken a toll far beyond loss of life, desperate humanitarian conditions and physical destruction,” said Ruba Jaradat, ILO regional director for Arab states.

“It has fundamentally altered the socio-economic landscape of Gaza, while also severely impacting the West Bank’s economy and labour market. The impact will be felt for generations to come.”

In terms of sectors, value added in construction and manufacturing dropped by 47.3 per cent, and by 35.4 per cent in the mining, water and electricity sector, driven by uncertainty and restrictions on labour and material movement. The information and communication services sector, “typically relatively resilient during wars,” declined by 18.5 per cent, the report said.

The wholesale and retail trade plunged 29 per cent, while the transportation and storage sector recorded a 33.5 per cent decline during the period. Financial and insurance activities as well as agriculture, forestry and fishing were also hit.

The economic downturn has devastated living standards, with real GDP per capita dropping by 33.4 per cent across the Occupied Palestinian Territories. In the Gaza Strip, per capita GDP plunged by 84.9 per cent, while in the West Bank, it decreased by 23.4 per cent, according to the report.

Labour force participation rates also declined from 45.2 per cent in the pre-war period (October 2022 – September 2023) to an average of 43.5 per cent during the war year, with some people stopping work altogether.

In the West Bank, the war has taken a severe toll on men, with employment plummeting by more than 28 per cent as job losses hit more than 150,000 Palestinian men who had been working in Israel. Real daily wages have also fallen.

“To pave the way for a sustainable recovery, an immediate cessation of war is essential, facilitating a building forward better approach that prioritises infrastructure development through employment-intensive infrastructure, decent job creation, skills development and inclusive economic support,” the ILO said.