Report Highlights Key Economic Developments in Q3 2025: Constraints on Economic Activity and Structural Imbalances in the Local Economy

SadaNews - The Palestinian Economic Policy Research Institute (MAS) has released Issue 83 of the quarterly economic monitor, which reviews the impact of the war shock and uncertainty on the performance of the Palestinian economy during the third quarter of 2025, amidst the ongoing aggression against Palestinian territories since the third quarter of 2023. The institution collaborates with the Palestinian Monetary Authority, the Palestinian Central Bureau of Statistics, and the Palestinian Capital Market Authority to produce this monitor. It provides readers and specialists with comprehensive and regular coverage of the performance of various economic sectors as well as major issues in social development and economic policies. It also covers significant local and economic developments.
    
The monitor confirmed that the scene of war continues to dominate the humanitarian, economic, political, and social landscape in all the occupied Palestinian territories, amidst unprecedented comprehensive destruction in the Gaza Strip and tightening restrictions in the West Bank, leading to constraints on economic activity, deepening structural imbalances in the local economy, declining income levels, and widening the gap between income and living costs. Below are the key economic developments in Q3 2025:

First: Gross Domestic Product: Data for the third quarter of 2025 showed a slight improvement, with GDP growing by 1.9% in real terms compared to the previous quarter, reaching about $3.1 billion, and growing by 1.4% compared to the same quarter of the previous year.

Second: Employment and Unemployment: The unemployment rate in the West Bank decreased in the third quarter by 0.1 percentage points to 28.5% compared to the second quarter, while the average daily wage was 139.2 shekels. The percentage of wage workers in the private sector earning below the minimum wage was 15.2%.

Third: Public Finances: Net public revenues and grants reached about 2.2 billion shekels during the third quarter of 2025, compared to 4.5 billion shekels in the same quarter of the previous year. Public expenditure decreased by 36% to 2.5 billion shekels (cash basis) when comparing the third quarter with the corresponding quarter of 2024. Government arrears rose to 2.1 billion shekels, and public debt increased to about $4.8 billion, an increase of 16.4% compared to the same quarter of the previous year.

Fourth: The Banking Sector: Credit facilities in the third quarter increased by 6.7% to reach $12.8 billion compared to the same quarter of the previous year, of which 26% was for the public sector. Meanwhile, customer deposits increased by 16.3% in this quarter compared to the same quarter of the previous year, reaching $21.3 billion, and bank profits stood at $137.2 million in this quarter compared to $57.5 million in the same quarter of the previous year.

Fifth: Palestine Stock Exchange: The market capitalization of companies listed on the Palestine Stock Exchange reached $4.6 billion at the end of the third quarter of 2025, down by 2.4% from the previous quarter, while the Al-Quds Index closed at 563.7 points, down by 3.9% compared to the previous quarter.

Sixth: Inflation and Prices: The Palestinian economy registered an inflation rate of 37% compared to the same quarter of the previous year, which impacted purchasing power, as it decreased by the same rate between the two quarters for those who earn and spend their income in shekels. For those who earn their income in dollars or dinars and spend in shekels, their purchasing power declined by about 46.5% compared to the same quarter of the previous year due to the decrease in the exchange rate of the dollar against the shekel and rising prices.

This issue also contains, in its second section, five analytical boxes addressing pivotal issues. The first box reviews the results of a joint study between the World Bank and the Palestinian Central Bureau of Statistics, which provided an in-depth diagnosis of the reality of poverty in the Palestinian territories and highlighted the correlation between geographic fragmentation and movement restrictions in the West Bank and the spread of poverty with increasing hardship in poverty pockets.

The second box discussed the importance of correspondent banks and the implications of Israel severing banking correspondence relations between Palestinian and Israeli banks, illustrating how the relationship has shifted from banking facilitation to political extortion.

The third box discussed a draft law aimed at limiting cash usage, specifically regarding the ceiling for cash payments and the transactions excluded from its provisions, as well as the penalties arising from violations of its texts.

The fourth box examined the implications of canceling work permits for Palestinian workers, based on an Israeli report that considered the ban a political rather than a security decision, and argued that restoring employment contributes to stabilizing both parties.

The fifth box presented the results of a study released in early 2026 by the institute in partnership with the Arab Center for Research and Policy Studies titled "Occupational Barriers on Roads in Northern and Central West Bank," which assessed the economic impact resulting from occupation barriers and the closure of entrances and exits in the West Bank.