The conflict between Israel and Hamas has had a devastating economic effect on the West Bank and Gaza, where GDP has shrunk by 4.2% in the month since fighting erupted, according to a report by the UN. It added that 400,000 people have been plunged into poverty during the same period.
According to a document released on Thursday by the UN Development Program and the Economic and Social Commission for Western Asia (ESCWA), the “shock” to Palestinian economic activity has been severe. It cited the total siege of Gaza, the destruction of capital, forced displacement, and restrictions on the movement of people and goods in the West Bank.
If the war continues for a second month, Palestinian GDP, which was $20.4 billion before the war started, would drop by 8.4%, or $1.7 billion, the UN projected. Should the conflict extend to a third month, the loss would rise to 12.2% of GDP, or $2.5 billion, pushing more than 660,000 people into poverty.
Preliminary calculations point to a potential GDP loss of up to 15% for a three-month war compared with the level projected for 2023 before the conflict.
The drop in GDP is expected to be due to a reduction in trade, capital inflows, and future investment and productivity, as well as higher production costs – including for transport – and greater overall insecurity. The negative effects on potential output and productivity could last for years to come, the report warned. Moreover, total investment is expected to decline by up to 15.3% compared with pre-war estimates for 2023, while total exports and imports are expected to decline by up to 13.2% and 4%, respectively.
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“The ongoing war raises the possibility of wider regional and global repercussions,” the UN stated. “Examining possible regional and global consequences, the current war has the potential to transmit its impact through oil and gas prices, which have seen moderate increases thus far. Further escalation could lead to substantial price surges, resulting in elevated production and transport costs, and ultimately higher inflation,” the report concluded.
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