The West Bank: An Economy in the Wind

Dr. Saeed Sabry / Economic Advisor - Board Member of the International Digital Transformation Authority - Dubai

At this critical stage in its history, the West Bank is facing an unprecedented economic crisis, with political, financial, and social factors intersecting to create a complex reality that threatens the stability of Palestinian society and its developmental future. Amid escalating security tensions and declining international support, the Palestinian economy in the West Bank is suffering from a severe constriction that threatens long-term repercussions.
First: A crisis resulting from accumulations
The roots of the economic crisis: The current crisis is not the result of recent events alone, but rather the product of decades of accumulation. The Palestinian economy's predicament is manifested in a deadly trilogy: financial dependency that shackles it, a fragile production structure that paralyzes it, and a lack of control over resources and crossings that keeps it hostage to the will of the occupation. These structural determinants render any economic plan merely a temporary measure unless the structural constraints that impede financial and productive independence are dismantled.
The crisis was exacerbated by the Israeli Finance Minister's decision to halt financial agreements with Palestinian banks, complicating the transfer of surplus shekels and threatening the stability of the entire banking system.
Second: Worrying indicators on the ground
Official data indicates that the West Bank's GDP contracted by 19% over the course of a year, while the unemployment rate exceeded 31%, with the number of job seekers continuing to rise. This economic contraction is being accompanied by a sharp rise in the prices of goods and services, which has deprived salaries of their real value.
Israeli restrictions on movement across more than 900 checkpoints and crossings have brought internal and external trade to a near-paralysis and weakened the operational capacity of productive sectors, particularly agriculture and industry.
Third: The financial system is under threat.
The decision to halt banking agreements with Israel puts the Palestinian financial system at risk. The inability to transfer surplus shekels and the restrictions on cross-border banking operations threaten a stifling liquidity crisis. If this issue is not addressed seriously, the local market could experience a banking crisis that threatens the stability of individuals and businesses alike.
Fourth: Weak international response
Despite the European Union's announcement of a financial aid package exceeding €1.6 billion, its slow implementation, and the fact that a large portion of it is directed to the Gaza Strip, limits its impact on the West Bank. Furthermore, international support remains dependent on major political shifts and falls short of the urgent requirements for rescuing the Palestinian economy.
Fifth: The suffering of the private sector
The private sector, which accounts for more than two-thirds of jobs in the West Bank, is facing an existential crisis. Declining demand, tightening import restrictions, and rising operating costs threaten the viability of businesses, especially small and medium-sized enterprises, increasing bankruptcy and unemployment rates.
Sixth: Accumulated loans and eroded salaries
Reports from the Monetary Authority indicate that the volume of loans granted to individuals has exceeded 11 billion shekels, with a significant increase in defaults. With wages continuing to erode and salaries being delayed, citizens find themselves facing unprecedented living pressures. This reality negatively impacts consumption and social stability, increasing the likelihood of a popular uprising.
Seventh: A roadmap to get out of the crisis
1. Reactivate financial understandings with the Israeli side to avoid the collapse of the banking system.
2. Lifting restrictions on movement and trade to support economic activity.
3. Launching an urgent government rescue plan to support affected families and small businesses.
4. Promote transparency and administrative reforms to restore the confidence of the community and international supporters.
5. Encouraging investment in technology and the digital economy as a practical alternative during the lockdown.
The West Bank is at a critical crossroads. It can either continue its path of deterioration and contraction, or embark on a new path based on political and economic reform and genuine partnership with the international community. Saving the Palestinian economy is not merely an urgent task; it is a national necessity to protect the social fabric and achieve economic dignity for Palestinians.

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The Palestinian economy's dilemma is manifested in a deadly trilogy: financial dependency that shackles it, a fragile production structure that paralyzes it, and a lack of control over resources and crossings that keeps it hostage to the will of the occupation.