Ramallah, West Bank – December 26, 2025 – The Palestinian economy is in severe crisis, with public debt reaching $14.6 billion, exceeding the territory’s GDP, and unemployment in Gaza hitting 77 percent, according to official reports and expert analyses.

The downturn is driven by Israel’s ongoing military actions in Gaza, restrictions on trade and movement in the West Bank, and a sharp decline in both domestic and international funding. The Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA) report that Gaza’s GDP contracted by 84 percent in 2025, while the West Bank fell by 13 percent, leaving overall economic activity far below pre-war levels.

Debt and Revenue Withholding

Palestinian Economy Minister Mohammed al-Amour said $4.5 billion in clearance revenues are being withheld by Israel, severely undermining the government’s ability to operate. The total debt includes obligations to the IMF, the banking sector, public employees, and the private sector.

“These pressures have created the most difficult economic period since the PA’s establishment in 1994,” al-Amour said, highlighting a widening budget deficit and the inability to cover essential expenses.

Sectoral Collapse

Nearly all sectors have been heavily impacted:

• Construction: -41%
• Industry and agriculture: -29% each
• Wholesale and retail trade: -24%
• Tourism: Devastated, with daily losses over $2 million since the 2023 Gaza conflict began

The tourism sector alone has lost over $1 billion, according to the Palestinian Economic Policy Research Institute. Hotel occupancy in the West Bank dropped 84.2% in the first half of 2024, causing widespread unemployment and financial losses.

Government Response

Al-Amour said the government is implementing urgent measures, including:

• Strengthening social protection
• Supporting small and medium-sized enterprises
• Developing the digital and green economies
• Substituting Israeli imports across seven sectors

Despite these efforts, experts warn that the Palestinian economy is approaching a tipping point. Haitham Daraghmeh, an economic analyst, said ongoing withholding of revenues and limited aid have paralyzed the economy, leaving the government unable to invest or sustain salaries.

“Without renewed international support and political reforms, the Palestinian economy risks sliding from prolonged crisis into outright collapse,” Daraghmeh said.