PALESTINE EMERGING anticipates ways the Palestinian economy can benefit from local and macro-trends already shaping other urban territories worldwide, build on its rich heritage, and overcome decades of constraint. For this purpose, we make assumptions about future conditions in Gaza, the West Bank, and East Jerusalem with a regional perspective; specifically, these relate to:

For our purposes, we consider three timescales to provide a context when considering challenges and opportunities for Gaza and the West Bank: 

  • Short term (by 2030)
  • Medium Term (by 2040)
  • Long Term (by 2050)

Achieving the PALESTINE EMERGING growth scenario will require decades of concerted efforts, large-scale investment and relaxation of the multi-layered system of restrictions that have hindered growth and employment in the Palestinian economy. The onset of war in 2023 exacerbated a long-standing history of economic dependence, fragility, volatility and poor overall performance.

STATUS QUO Scenario 
(constrained conditions)
(growth conditions)

From 2006, GDP grew most years in the West Bank, but stagnation and volatility dominated Gaza. Figure 3 demonstrates this divergence, with the West Bank showing resilience even during the six periods of strong negative growth following conflict-driven shocks in Gaza.

While GDP per capita almost doubled in the West Bank from 1994-2022 (despite a strong drawback during the pandemic, which also affected Gaza greatly), Gazans are poorer today than in 1994. Figure 2 shows how the negligible difference in GDP per capita observed between regions in that year widened from 2006, with West Bank GDP per capita more than 260% higher than that of Gaza in 2022.

The relative decline of Gaza has depressed the  economic performance of the Palestinian economy against the wider region over the last decade (Figure 3). As a result, while GDP per capita in the West Bank is higher than in Egypt and Jordan (Figure 4), the West Bank and Gaza combined underperform those comparative economies (with Gaza´s GDP per capita close to levels observed in poor Sub-Saharan African countries and 36 times lower than in neighboring Israel – itself a major driver of instability).

Figure 1  |  PCBS (2022)

Figure 2  |  PCBS (2022) 

Figure 3  |  PCBS (2022)


In any given economy, “leading” or “specialized” tradable sectors (e.g. manufacturing, tourism, export-oriented digital services) drive activity, growth and employment, accompanied by “supporting” industries  (e.g. public services, health and education, retail and commerce). 

In Palestine, the weight of high-value, high-productivity, export-oriented industries in total employment is relatively low (Figure 5), where low-value services and wholesale retail employment make up the majority of all employment.

Most value added sectors are service oriented  (Figure 6), with tradables and dynamic industries seriously hindered by Israeli-imposed restrictions on the movement of people and goods in the whole of Palestine

As a result, labor productivity, measured by value added per employee, has remained largely stagnant in the West Bank over the last two decades, and in Gaza dropped to its lowest levels in 2022 (Figure 7), even before the latest round of violence. To achieve the aspiration of sustainable growth, it is essential to transition to higher value, export oriented, higher productivity sectors, making the most of the enormous untapped potential for economic diversification across Palestine.

Figure 5 |  PCBS (2022)

Figure 6|  PCBS (2022)

Figure 7  |  PCBS (2022)

Poor growth and other characteristics discussed above correlate strongly with high unemployment (Figure 8). This is certainly true in the case of Palestine, with Gaza presenting alarmingly high rates of joblessness, both in absolute terms and in comparison to the wider region. In the West Bank, total unemployment has been resistant to economic growth, especially from 2006-2007, when it remained consistently above 10% despite periods of stronger economic performance.

At the same time, consistent with the start of “divergent” trajectories between the Palestinian regions, overall unemployment in Gaza spiked to staggeringly high levels, reaching 45% in 2022, before the 2023 war (Figure 9), the highest in the region.

The situation is particularly dramatic among women and young people, with nearly 9 in 10 female labor market participants aged 15-24 unemployed in Gaza in 2022 (Figure 10). Rebuilding the employment base with stable, high-quality jobs following economic diversification is crucial for prosperity and stability in the region.

Figure 8  |  PCBS (2020, 2023a)


Figure 10  |  PCBS (2023b)

The current customs union and the high dependency on taxes collected by Israel on behalf of the Palestinian Authority (PA) also results in fiscal fragility. Restrictions, originally imposed on security grounds, include Israel’s long-standing control over activities in the West Bank. These constraints include barriers to movement of people and goods from the West Bank and Gaza, restrictions on aquifer access, and limits on mobile communications standards. They also impose low-quota restrictions on banking activities (e.g. cash shekel transfers to Israeli banks).

In this context, preconditions for sustainable growth include greater openness, economic diversification, and mutually advantageous links with Israel (recognizing proximity to a high-income OECD economy is a competitive advantage, yet to be fully exploited). Palestine’s import and export trade with Israel remains high despite decreasing intensity in the past few years (Figure 11).

It is also important to note the interconnection through the labor market, with almost 25% of West Bank workers employed in Israel and Israeli settlements in 2022 (Figure 12), attracted by daily wages which were more than double those in the West Bank (Figure 14). However, this imbalance creates distortions in the Palestinian labor market with close to a quarter of all workers from the West Bank working in Israel.

Figure 11  |  PCBS (2023c)

Figure 12  |  PCBS (2023b)

Figure 13  |  PCBS (2023b)


Figure 14  |  PCBS (2023b)

While a thorough, reliable, and comprehensive assessment of the devastation in both Gaza and
the West Bank caused by the war starting in October 2023 is yet to be carried out, early indicators show major, unprecedented impacts on the built environment, production, labor market and beyond.

  • The World Bank and UN estimate the cost of damage to critical infrastructure in Gaza at $18.5 billion by the end of February 2024 (equivalent to 97% of Gaza and the West Bank GDP combined).
  • About half of all private sector enterprises halted or reduced their activities in Palestine, and there was  almost total suspension in production at about 56,000 businesses in Gaza (where more than half of all establishments depend on internal trade).
  • Employment in Gaza is at a historic low, with over 150,000 jobs disrupted (exceptions being employees in the health and humanitarian relief sectors). The loss of high-potential youth and a corresponding ‘brain drain’ throughout Palestine exacerbates the negative outlook.
  • The almost total suspension of production in Gaza (operating at less than 15% of its capacity) has resulted in losses of around USD 25 million/day (not accounting for direct losses due to destruction of buildings and other assets).
  • In the first two months of the war, production in the West Bank alone dropped by 40% compared to the previous year, with an estimated loss of more than USD 1 billion.
  • In a conservative scenario, assuming that productivity (measured by GDP per employed person) remained constant between 2022 and 2023, we still project overall GDP to have dropped 50% by year-end 2023.

The constrained STATUS QUO Scenario, aggravated by the impacts of the war, need not be the future of Palestine – not least given the implications of instability for the wider region.

The Palestinian economy is small. Even with internal barriers removed and borders relatively open, the growth and development prospects for the Palestinian economy will be dependent on its openness and connection to the broader region. Its economic success will inevitably be tied to its ability to engage in greater economic and social cooperation and functioning as part of a transnational region

In the 21st century, urban regions are becoming more important than ever before; they accommodate most of the world’s population and dominate the world’s economic and cultural life. In this urban age, size matters. Large well-connected regions can draw on a bigger pool of labor and talent, develop more complex and specialized economies, support larger and more effective infrastructure, and leverage their connectivity as global hubs. 

Groups of nearby cities work together, sometimes informally, as part of a larger system. In this way they share talent, infrastructure and economic assets. Individual cities can specialize in complementary ways. In doing so, their related populations can perform more strongly together than they could on their own. In some cases, city-regions can cover entire countries, or even span national borders. Such regions do not supersede nations; they optimize economic and social opportunities within the broader territory and make it easier for people to access opportunities.

PALESTINE EMERGING capitalizes on the promise of an ambitious and realistic Growth Scenario. Regardless of any evolving political outcomes, we believe Palestine will develop comparative advantages (including regulatory arbitrage) within its connected territory, which is itself within an evolving Levantine Mega-Region approaching 50 million inhabitants.


(economic structure)

Trade and exchange.

The built-up area of the Levantine Mega-Region encompasses major cities. Despite varying regulatory and political systems, the Levant functions as a coherent trade area, bridging between the economies of Africa and Eurasia. Its reputation for collaboration and connectivity attracts and retains talent and investment, competing with other global megacity regions and large metropolitan areas. Cities within the Mega-Region will continue to specialize.

PRECEDENTS: multinational megacity regions include ‘Greater Bay’ (East Asia), and the ‘Blue Banana’ (Northern Europe). 


(urban structure)


The formal urban structure of Palestine anchors the political, economic and cultural life of its population. By joining Gaza and the West Bank with strategic connections, it overcomes the constraints of non-contiguous territory. The urban structure leverages infrastructure connectivity to enable mobility of labor, finance and goods.

PRECEDENTS: Luxembourg, Panama, Qatar, and Malta. These areas are distinct from true city-states such as Singapore in that they comprise both their primary city and a number of peripheral cities and towns with autonomous municipal authorities; they also include substantial rural areas. 


(legal structure)

Macro-economic stability.

Palestine incorporates a unifying legal framework across Gaza and the West Bank; a range of powers create comparative advantages relative to its peers and within a wider global context. 

PRECEDENTS: the regions in Belgium, the cantons in Switzerland, the states of the United States of America, and the emirates in the UAE.