Central Bureau of Statistics and Monetary Authority: The Palestinian economy remains deeply trapped in recession during 2025

SadaNews - The Central Bureau of Statistics and the Monetary Authority issued a joint press statement regarding the Palestinian economic harvest for 2025 and the economic forecasts for 2026, noting that the data is based on fixed prices and does not include that part of Jerusalem that was forcefully annexed by the Israeli occupation following its occupation of the West Bank in 1967.

The Palestinian economy is still deeply immersed in recession during the year 2025

Despite the Palestinian economy recording a calculated increase of 4% in 2025 compared to 2024, the GDP still shows an extended recession, having dropped by 24% from its level in 2023. This decline reflects the cumulative damage inflicted on the economy since the onset of the Israeli occupation’s aggression against the West Bank and Gaza Strip, which has led to diminished productive capacity and ongoing bottlenecks in economic activities.

The GDP in 2025 registered a sharp decline in the Gaza Strip of 84% compared to 2023, while it decreased in the West Bank by 13% during the same period. Although the West Bank recorded a limited increase of 4.4% in 2025 compared to 2024, the GDP in the Gaza Strip continued to shrink, registering an additional decline of 8.7% during the same period.

The growth recorded in 2025 is attributed to a relative improvement in some productive sectors and a limited return of commercial activities compared to 2024. However, the level of GDP in Palestine remains significantly below its pre-aggression levels, confirming that the Palestinian economy has not yet restored its productive capacity, and that the recovery trajectory remains fragile and constrained by the repercussions of aggression and ongoing imposed restrictions, along with a collapse of all economic activities in the Gaza Strip in 2025 compared to 2023 and sharp contractions in most economic activities in the West Bank, despite the increases compared to 2024.

The Palestinian economy is considered a service economy, with around 60% of the Palestinian economy being services, while the supporting productive sectors for economic growth constitute only about 19% of the total economy. This indicates that the Palestinian economy is variable and highly affected by shocks, and throughout 2025, most economic activities in Palestine decreased compared to 2023.

The construction sector recorded the highest decline of 41% (29% in the West Bank and 99% in the Gaza Strip), reaching a value of 296 million USD, followed by the industry sector with a decline of 25% (21% in the West Bank and 94% in the Gaza Strip), totaling 1,155 million USD. The services sector also saw a decrease of 25% (12% in the West Bank and 82% in the Gaza Strip) with a value reaching 6,794 million USD, while the agriculture sector dropped by 18% (stable in the West Bank and down 92% in the Gaza Strip) to reach 686 million USD.

In 2025, most economic activities showed a marginal increase that does not reflect the beginning of a recovery for the Palestinian economy compared to 2024, as economic activities remained about a third lower than their pre-aggression levels.

A decline in the volume of trade exchange to and from Palestine during 2025 compared to 2023

The volume of trade exchange in Palestine with the outside world witnessed a decrease of 12%. Imports recorded a decline of 17%, reaching 7,881 million USD during 2025 compared to 2023, while Palestinian imports are approximately three times the value of Palestinian exports. The value of goods and services exports from Palestine rose by 5% to reach 2,856 million USD.

This increase is attributed to the fact that most Palestinian exports come from the West Bank, which experienced a relative increase during the same period, reflecting the continuing deficit in the Palestinian trade balance. Meanwhile, exports and imports in 2025 increased by 18% and 20%, respectively, compared to 2024, yet still remained below their pre-aggression levels.

It is worth noting that the largest share of trade exchange with the outside world in the Gaza Strip reached 29% of total trade in Palestine in 2003. However, this percentage decreased to less than 4% during the Israeli occupation aggression. The near-total halt in supply chains into and out of the Gaza Strip resulted in a health and food disaster throughout the region, due to a severe shortage of basic goods, medicines, health supplies, and food items, supplied at minimal levels not exceeding 4% of the quantities that should actually be provided to the Gaza Strip.

Unemployment rates in the Gaza Strip exceed 77% in 2025

The Palestinian labor market still faces serious challenges amidst the ongoing economic and social impacts of the Israeli aggression on the Gaza Strip. Despite a slight improvement in unemployment and labor force participation indicators during 2025, the figures still reflect a state of recession and stark disparity between the West Bank and Gaza Strip.

Approximately half of the labor force in Palestine is disrupted, with an unemployment rate of 46% in 2025, comprising 28% in the West Bank and 78% in the Gaza Strip. This reflects the high unemployment rates in both regions, despite minor changes in those statistics, with over 650,000 individuals unemployed.

Despite this challenging reality, the labor force participation rate increased during 2025 to reach 43.7%. This increase is partly due to individuals' attempts to engage in any form of work or seek alternative livelihood opportunities after the aggression. The participation rate in the labor force in the West Bank was 43%, while it was recorded at 38% in the Gaza Strip, and participation rates still remain below their pre-war levels in 2023.

Poverty and living standards

Before the Israeli aggression on the Gaza Strip, poverty rates exceeded 63%, with the poverty line in Palestine being approximately 2,717 Israeli shekels, while the extreme poverty line was around 2,170 Israeli shekels. After the ongoing aggression on the Gaza Strip, it can be said that we have surpassed the concept of poverty, and are now discussing various levels of famine and food insecurity, with total consumption decreasing in 2025 by 24% (12% in the West Bank and 81% in the Gaza Strip) compared to 2023. This reflects the direct impact on the living standards of individuals in Palestine. In other words, it can be said that most individuals in the Gaza Strip suffer from high levels of food insecurity.

Sharp rise in price levels

In terms of prices in Palestine during 2025, they rose by about 11% compared to 2024, due to the sharp rise in the Gaza Strip of about 22%, despite a slight decrease in the West Bank by about 0.13%, as the suffocating siege on the Gaza Strip continued, leading to a severe shortage of goods entering Gaza. Additionally, Palestine has been affected by the regional situation.

"Prospects for the Palestinian economy in 2026: A marginal increase within a difficult economic reality"

Both the Palestinian Monetary Authority and the Palestinian Central Bureau of Statistics issued reports on the economic forecasts for 2026, available on their respective websites. The reports addressed predictions for the key indicators in the Palestinian economy during 2026, based on a set of factors and assumptions included in the baseline scenario, which are expected to reflect their impact on the performance of various sectors, particularly the real sector, financial sector, and external sector.

The core assumptions underlying the baseline scenario for 2026 indicate the continuation of the existing economic and political conditions without significant changes. The scenario assumes the retention of strict restrictions imposed on the movement of individuals and goods and crossings, along with continued limited economic activity in the Gaza Strip due to the extensive destruction inflicted on the productive infrastructure, with activities confined to a narrow scope linked to humanitarian aid and relief operations. The scenario also assumes that a large segment of the Palestinian labor force remains unable to access the job market within Israel, negatively impacting income levels and local demand.

In terms of public finances, the scenario assumes continued pressures on the Palestinian government's public budget, amidst irregular transfers of clearance revenues and ongoing Israeli deductions, alongside a decline in local revenues due to weakened economic activity. The scenario also assumes that levels of grants and external assistance remain at their currently low limits, and in the external sector, it is expected that performance will continue to be affected by Israeli restrictions and obstacles imposed on the movement of individuals and goods and crossings.

In light of these assumptions, forecasts estimate that the Palestinian economy will record an increase between (4.1% - 4.5%) during 2026. This growth reflects the continuation of the gradual recovery path that began after the sharp contraction recorded in 2024, without indicating a broad recovery or actual restoration of productive capacity. This growth is mainly attributed to a limited improvement in components of aggregate demand, particularly final consumption, supported by continued flows of humanitarian aid and private remittances, in addition to a partial positive contribution from investment spending.

Given that the environment in which the Palestinian economy operates involves a high degree of risk and uncertainty, this forecast includes an analysis of potential risks that may occur to varying degrees (optimistic scenario and pessimistic scenario), which are expected, if they occur, to have either positive or negative implications for economic performance in the short term.