An Economy Under Siege: The West Bank and East Jerusalem Between Income Loss, Mobility Paralysis, and the Clearance Revenues Crisis Since October 7, 2023

Gaza: The Living Memory Since October 7, 2023, the Palestinian economy in the West Bank and East Jerusalem has entered an unprecedented phase of economic contraction. This is the result of three overlapping major shocks: the loss of the labor market inside Israel, the tightening of movement restrictions within the West Bank, and the escalating financial crisis of the Palestinian Authority (PA) due to the withholding of clearance revenues. Data issued by the World Bank, the United Nations Conference on Trade and Development (UNCTAD), and the International Labour Organization (ILO) indicate that the Palestinian economy has suffered one of the deepest contractions in its modern history, with protracted effects impacting the labor market, production, consumption, and public finance. ### I. A Historic Economic Contraction Data from the World Bank and UNCTAD indicate that during 2024, the Palestinian economy recorded a contraction of approximately 27%, representing one of the highest rates of decline recorded in the region within a short timeframe. Furthermore, the Gross Domestic Product (GDP) dropped to about 70% of its 2022 level, while per capita income plummeted to levels reminiscent of the early 2000s—amounting to the loss of more than 22 years of economic progress. In the West Bank specifically, contraction estimates ranged between 19% and 23%, driven by declining local consumption, the suspension of a broad segment of investments, and the disruption of internal commercial activity between cities and villages. ### II. The Labor Market: Loss of Tens of Thousands of Jobs Prior to October 7, 2023, approximately 177,000 Palestinian workers from the West Bank were employed inside Israel and the settlements, serving as one of the most vital income sources for the Palestinian economy. Following the outbreak of the war, the number of workers permitted to work dropped to only about 24,000. This signifies a direct loss of approximately 153,000 job opportunities, representing a decline of nearly 86%. World Bank estimates indicate that the Palestinian economy loses approximately $25.5 million daily in workers' income, which translates to about $765 million per month, and roughly $9.3 billion annually in lost wages. This decline has directly impacted household purchasing power, increased debt levels, and weakened demand in local markets, while placing growing pressure on the banking system. ### III. Unemployment: A Deepening Crisis in the Labor Market According to data from the ILO and the Palestinian Central Bureau of Statistics (PCBS), unemployment rates in the West Bank spiked from about 13% prior to the war to a peak of around 35% during the initial months of the crisis, before later stabilizing at levels between 28% and 29% during 2025. Based on estimates of the West Bank labor force size—which stands at nearly 900,000 workers—these percentages translate to between 250,000 and 315,000 unemployed individuals, a level unprecedented in the Palestinian market in recent years. ### IV. Clearance Revenues: The Severest Financial Crisis Clearance revenues—which Israel collects on behalf of the Palestinian Authority—form the backbone of public revenues, accounting for more than 65% of the Palestinian treasury's income. In official statements, the Palestinian Minister of Finance noted that Israel is withholding and deducting a large portion of these clearance revenues, estimating the total frozen and withheld funds at between $4.4 billion and $5 billion. This reflects the magnitude of the compounding financial crisis facing the Palestinian Authority over the last two years. The Ministry of Finance confirms that these deductions have accumulated in recent years, leading to a severe liquidity crisis that has disrupted regular salary payments. Consequently, partial salaries have been paid across multiple periods, alongside an expanded reliance on borrowing from local banks and delaying obligations toward the private sector. Furthermore, estimates from the World Bank and UNCTAD indicate that total Israeli deductions from clearance revenues between 2019 and 2025 range between $1.7 billion and $2.0 billion, rendering the clearance revenues file one of the most dangerous sources of financial pressure on the Palestinian economy. ### V. Checkpoints, Closures, and the Fragmentation of Economic Geography Data from the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) shows that the number of obstacles and checkpoints in the West Bank rose from about 642 in mid-2023 to around 793 in 2024, and reached approximately 925 by 2025—reflecting an increase of nearly 43%. These restrictions have lengthened travel times between Palestinian cities by two to five times, driven up transport and freight costs, disrupted internal supply chains, and transformed the West Bank into semi-isolated economic zones, directly impacting trade and production. ### VI. The Private Sector: Broad Contraction in Economic Activity Economic surveys indicate that approximately 95% of Palestinian businesses recorded a decrease in sales, while 76% reported experiencing transport and distribution issues. Furthermore, nearly 29% of businesses indicated they were forced into partial or full closure during periods of the crisis. This reflects a widespread decline in economic activity resulting from falling demand and deteriorating purchasing power. ### VII. Construction and Agriculture Sectors The construction sector is among the hardest hit due to its heavy reliance on Palestinian workers employed inside Israel. The suspension of workers' entry into Israel has led to partial paralysis in the sector, halting or slowing down thousands of residential projects, alongside falling demand for construction materials and losses estimated at hundreds of millions of dollars. As for the agricultural sector, it has been severely impacted by the denial of access to lands near the separation wall and settlements, alongside a decline in production seasons—particularly the olive harvest in 2023 and 2024. This is compounded by difficulties in marketing and transport, leading to accumulated losses in farmers' incomes. ### VIII. Military Incursions and Indirect Economic Impacts Frequent military incursions into West Bank cities and camps have led to recurring market closures and the disruption of educational and economic institutions for hours or days. Additionally, damage to infrastructure—including roads, water, electricity, and telecommunications—has caused daily indirect operational losses. While these are difficult to quantify precisely, they recur systematically across several areas. ### IX. East Jerusalem: An Economy Under Pressure East Jerusalem has witnessed a marked decline in economic activity, particularly within the domestic and religious tourism sectors. Market activity in the Old City has dropped, alongside the closure or downscaling of hundreds of commercial establishments, and a decline in the performance of the hotel and restaurant sectors due to diminished traffic arriving from the West Bank. --- The aggregate economic data indicates that since October 7, 2023, the Palestinian economy in the West Bank and East Jerusalem has entered a phase of deep and interconnected contraction. The loss of tens of thousands of jobs has coincided with a severe liquidity crisis caused by the withholding of clearance revenues, alongside the restriction of internal movement via checkpoints and closures. According to the World Bank, the continuation of these conditions could entrench a state of long-term economic stagnation that will be difficult to reverse, even in the event of subsequent political or security improvements. This makes the current crisis one of the most dangerous economic shifts the Palestinian economy has witnessed in its modern history..