UN report: Gaza war could set back Palestinian development to 1950s

UNDP report outlines action that needs to be taken immediately - including a ceasefire

Displaced Palestinians evicted by the Israeli military flee Jabalia on Tuesday. Reuters

Live updates: Follow the latest on Israel-Gaza

Development in Gaza and the Israeli-occupied West Bank could be set back decades according to a new UN report, which provides details of the economic devastation after a year of catastrophic war.

The UNDP report, released on Tuesday and titled Gaza War: Expected Socioeconomic Impacts On The State of Palestine, tracks indicators such as rising hunger and lack of shelter. While it has a strong focus on the Gaza Strip – where more than 42,000 people have been killed and nearly 100,000 wounded – it also tracks the wider impact on Palestinian territories as a whole.

It notes that the State of Palestine has lost $7.1 billion in real GDP due to the war, reiterating previous estimates of $18.5 billion in damage to Gaza.

Looking at the UN’s Human Development Index, the report says the key international indicator of poverty and progress could “regress by 69 years (to June 1955 levels)”, or the equivalent, since the indicator began in 1990.

About 140,000 homes have been damaged or destroyed, meaning that even if the war ends now, more than 740,000 people will be homeless, which carries its own risks, including the danger of disease in crowded displacement camps.

The Human Development Index was formulated by Pakistani economist Mahbub Ul Haq and measures factors such as schooling and the health of the population for a more granular understanding of poverty and development than GDP alone.

The report highlights how “93 per cent of children and 96 per cent of pregnant and breastfeeding women are consuming fewer food groups daily, leading to households skipping meals. As a result, the need for nutrition support is becoming more urgent”.

But the report also highlights disaster in the West Bank, where Israeli fire has killed nearly 800 people since October 7 – a colossal spike in violence amid regular Israeli raids into occupied towns such as Jenin and Nablus. Israeli checkpoints and the suspension of about 150,000 work permits for Palestinian workers to enter Israel have left the economy there in ruins, aggravating already high unemployment.

Israel has also stopped nearly $200 million per month being transferred to the Palestinian Authority, funds it collected on the PA's behalf from taxes and customs duties, known as “clearance revenue”.

“As of September 2024, approximately 3,300,000 Palestinians (2.3 million in Gaza), including 1,554,700 children, were in urgent need of various forms of humanitarian assistance,” the report warns. It says that in the West Bank and Gaza, poverty is expected to hit 74.3 per cent this year, affecting 4.1 million people.

Sharp decline

The report outlines three scenarios. In one, Israel does not lift restrictions on workers and clearance revenue, although current economic aid is maintained. A second scenario imagines restrictions continue but an additional $280 million in economic aid is allocated, and in a third scenario all restrictions are lifted and $570 million in aid is allocated, followed by $280 million a year.

Only in the third scenario does the report offer any hope of progress, albeit with steep unemployment.

The first scenario, with current aid levels but continued Israeli economic restrictions, predicts catastrophe. With the worker permit ban in place and revenue held back, “GDP is projected to fall by 20.1 per cent in 2025 and by 34 per cent by 2034 compared with prewar levels, with multidimensional poverty remaining extremely high.

“Achieving a permanent ceasefire is expected to decrease the already high unemployment rate by approximately 3 percentage points, allowing it to reach 55 per cent by 2034.”

By comparison, Tunisia has one of the worst unemployment rates in the Middle East, at 16 per cent.

In the second scenario, the restrictions continue but “$280 million in humanitarian aid addresses immediate needs”. But the report warns that this sum “does not support long-term economic recovery. Under this scenario, GDP is expected to decline by 19.6 per cent in 2025, with a 33 per cent drop by 2034. Poverty will persist, with only minimal improvements.”

Worryingly, even in the best scenario, with $280 million allocated for aid now and $290 million a year also allocated, plus all restrictions lifted, “productivity increases by 1 per cent annually” and unemployment stabilises at a staggering 26 per cent.

The report says any hope of recovery will need the restoration of “freedom of movement, establishing a political framework that promotes Palestinian ownership led by the PA, and providing minimum essential services such as water, electricity and telecommunications”.

It says a capacity-building effort – aid projects that build the skills of government workers to meet international standards – would be needed for Palestinian institutions “for recovery and reconstruction, reconnecting Gaza and the West Bank”.