Import Substitution Policies for Primary Goods - RT3

The War has now continued for seven months (starting in October 2023), and the Gaza Strip and the West Bank are both set to witness a significant deterioration across all macro- and micro-economic indicators for 2024. This mainly takes the form of a sharp decline in GDP, combined with a significant rise in unemployment and poverty (both are likely to reach unprecedented levels). GDP declined by 29.3% during Q4 2023, equivalent to about USD 1 billion (according to estimates by PCBS - the Palestinian Central Bureau of Statistics). In the Gaza Strip, subject to a brutal war and the systematic destruction of infrastructure, housing, and public facilities, GDP shrank sharply and  unprecedentedly during Q4 2023 by more than 81%, accompanied by an increase in unemployment, reaching 75%. 

The West Bank’s GDP contracted by 19%, with unemployment rising to 30% (PCBS). Within this context, the Palestine Economic Policy Research Institute (MAS) continues to monitor economic and social developments during the course of the current War on both the Gaza Strip and the West Bank. MAS undertakes and publishes research on the devastating economic effects of this War on both the Gaza Strip and the West Bank, relying primarily on data sourced from PCBS, and indicator-forecasting performed in-house by MAS. Concerning economic performance for 2024, the most prominent indicators are:

• Concerning the Gaza Strip, it has become unlivable. Economic activity, social services, healthcare and education have collapsed.
• The West Bank’s GDP declined significantly by about 19%, due to repeated incursions into West Bank cities, villages, and camps, combined with total closure between governorates.This resulted in a major paralysis of all productive sectors, as about one-third of Palestinian economic establishments have ceased work, with the remainder operating at reduced capacity.
• The almost complete cessation of employment in Israel has had major repercussions on Palestinians’ household incomes, private consumption levels, savings and domestic revenues. Consumption declined sharply across Palestine by 33% in Q4 2023 (21% for the West Bank, 82% for Gaza), continuing into 2024. Wages paid to Palestinian workers in Israel constitute 99% of the net remittances of Palestinians working abroad, equivalent to 14% of total disposable income (of which 88% is for the purchase of goods and production inputs largely from Israel).
•  The continued prevention of Palestinian workers from entering Israel during 2024 is expected to lead to a further decline in household consumption, by at least 15.9% compared to 2022 (monthly losses of up to NIS 1 billion).
•  The general anticipation is that there will be a significant decline in imports in 2024 by 30%, constituting about 49.5% of total consumer spending. This decline is largely due to the interruption of wages paid to workers in Israel, and the loss of income for a large number of workers in the local economy, leading to a drop in demand for imports.(2)
• It is expected that local and foreign revenues will decline by about 20% as a result of the economic downturn and the significant rise in unemployment.
• Unemployment rates are expected to exceed 35% during 2024. The International Labor Organization (ILO) estimates that unemployment in the West Bank may reach 45% with the continuation of the War across the duration of 2024.