UNCTAD: Gaza’s economy could take 70 years to recover in unprecedented destruction

GAZA, PALESTINE: The ongoing conflict has caused severe devastation in Gaza, leading to a startling projection by the United Nations Conference on Trade and Development (UNCTAD): it may take nearly 70 years for Gaza to recover its GDP levels from 2022.

This grim assessment, unveiled in a UNCTAD report on Wednesday (31 January), encompasses GDP loss, recovery timelines, and the enduring impact on poverty and household expenditure, painting a daunting picture of the developmental challenges ahead.

Employing innovative satellite imagery and official data, UNCTAD estimates a 4.5% contraction in Gaza’s economy during the first three quarters of 2023.

However, the military operation significantly escalated this decline, resulting in a staggering 24% contraction of GDP and a 26.1% drop in GDP per capita for the entire year.

The report cautioned that even if the current military operation were to cease immediately, with prompt reconstruction efforts aligned with the 2007-2022 growth trends persisting at an average rate of 0.4%, Gaza would only be able to restore its GDP levels of 2022 by 2092.

This scenario implies a continuous decline in GDP per capita and socioeconomic conditions.

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

Recovering from the current military operation will demand a financial commitment several times greater than the $3.9 billion resulting from the 2014 military operation in Gaza, according to the report.

“It will require a concerted international effort to restore pre-conflict socioeconomic conditions.”

Crisis escalates: Gaza teeters on the brink of uninhabitability

Gaza is on the brink of becoming uninhabitable as socioeconomic conditions have reached a critical point.

In 2022 and the first half of 2023, over two million Gazans endured dire circumstances in one of the world’s most densely populated areas.

They faced challenges such as inadequate access to clean water, sporadic electricity provision, and the absence of a proper sewage system.

Before the latest military operation, two-thirds of the population lived in poverty, and unemployment affected 45% of the workforce.

The ongoing military operation has intensified the crisis, leading to the displacement of 85% of Gaza’s population.

This displacement has not only disrupted economic activities but has also exacerbated existing issues, plunging more people into poverty and unemployment.

UNCTAD’s assessment paints a grim picture, emphasizing that the restoration of pre-conflict socioeconomic conditions in Gaza is a monumental task that will span decades.

Unemployment in Gaza reached 79.3% in December 2023

As of December 2023, unemployment had surged to 79.3%. Meanwhile, 37,379 buildings – equivalent to 18% of the Gaza Strip’s total structures – have been damaged or destroyed by the military operation.

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

The UNCTAD report further highlighted the pressing need to break the cycle of economic destruction that has rendered 80% of the population dependent on international aid, warning that a return to the pre-conflict status quo is not an option.

The potential and pace of Gaza’s recovery hinge on factors such as the duration of the ongoing military operation, the extent of donor engagement, and the subsequent economic growth trajectory.

Even in an optimistic scenario with an immediate cessation of hostilities, restoring Gaza to its pre-conflict socioeconomic conditions could take decades without a well-funded recovery program fully endorsed by the international community.

UNCTAD’s assessment issues a cautionary note, asserting that a new era of economic rehabilitation should not merely aspire to return to the pre-October 2023 status quo.

Breaking the vicious circle of destruction and incomplete reconstruction is imperative for sustainable recovery.

UNCTAD report advocates strategic measures for Gaza’s economic growth

Gaza’s economic challenges, deeply rooted in 56 years of occupation and a 17-year blockade, demand a nuanced understanding and pragmatic strategies to unlock its growth potential.

UNCTAD report highlights key measures, including the restoration of the non-operational Gaza International Airport, the construction of a seaport, and enabling the Palestinian government to tap into natural gas fields discovered in the Mediterranean Sea off the shore of Gaza, discovered in the 1990s, to finance infrastructure reconstruction.

Emphasizing the urgency of the situation, the report stresses the need for immediate and substantial budget support to the Palestinian government.

This support is crucial to preventing a broader collapse by sustaining governance, ensuring essential public services, and maintaining aggregate demand through salary payments and clearing arrears to the private sector.

Notably, foreign aid has dwindled significantly, from $2 billion (27% of GDP) in 2008 to $550 million (less than 3% of GDP) in 2022.

UNCTAD underscores that the resolution of Gaza’s crises requires ending the current military operation and lifting the blockade as a pivotal step toward realizing a two-state solution along the 1967 borders, in line with international law and relevant United Nations resolutions.

The report urges donors and the international community to recognize that the constraints on the Palestinian economy, particularly in Gaza, extend beyond the recent confrontation.

Gaza death toll reached 26,422

By 28 January 2024, more than three months into the military operation, the reported death toll in Gaza reached 26,422, the majority of whom were children and women.

At least 65,087 people have been injured and many have been reported missing in Gaza, likely trapped or dead under the rubble.

More than three months into the military operation, an estimated 1.9 million people, or nearly 85 per cent of the population of Gaza, became internally displaced, following evacuation orders by the Government of Israel.

Nearly 1.72 million of these internally displaced persons were registered in severely overcrowded facilities of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), while the rest took shelter in schools, hospitals, wedding halls, offices and community centres, and some camped in open space near shelters.