ILO Warns Gaza War Has Deeply Damaged West Bank Economy and Jobs

The International Labour Organization (ILO) has released a sobering new analysis detailing the far-reaching impact of the two-year war in Gaza on the West Bank's economy and labour market, revealing widespread job losses, falling incomes, and rising poverty across the Occupied Palestinian Territory (OPT). The findings underscore that even though the fighting was concentrated in Gaza, its repercussions have devastated economic and social conditions throughout the region.

A War That Reshaped an Entire Economy

The latest bulletin — The Two-Year War in Gaza: Impacts on Employment and Livelihoods in the West Bank (Bulletin No. 6) — was jointly produced by the ILO and the Palestinian Central Bureau of Statistics (PCBS). It forms part of an ongoing series tracking the labour and economic consequences of the conflict on both Gaza and the West Bank, including East Jerusalem.

According to the report, two years of conflict have left deep economic scars and lasting disruptions in employment and production across the OPT. Although the ceasefire announced earlier this year has halted active hostilities, the war's structural and economic aftershocks continue to cripple livelihoods.

Between the first quarters of 2023 and 2025, the OPT's real gross domestic product (GDP) contracted by 29 per cent, a staggering decline indicative of prolonged instability. The West Bank economy, which had initially shown signs of resilience, shrank by 17.1 per cent during the same period.

Despite a modest rebound of 9.9 per cent growth in early 2025 compared to the previous year, output remains well below pre-war levels, signaling a fragile and uneven recovery. The situation worsened again from the second quarter of 2025, fueled by a liquidity crunch in the Israeli Shekel, escalating regional tensions, and intensified movement restrictions.

Severe Economic Disruptions and Restrictions

The ILO report attributes much of the West Bank's economic collapse to tightened Israeli movement restrictions, including more than 800 checkpoints and gates that have fragmented daily life and stifled trade, transport, and access to services. The result has been a dramatic slowdown in business activity and employment.

The war has also amplified existing political and economic pressures:

• Revocation of Palestinian work permits for employment in Israel after the events of 7 October 2023, eliminating a vital source of income for tens of thousands of households.

• Withholding of Palestinian customs revenues by Israel — taxes and fees collected under the Paris Protocol — which has crippled the Palestinian Authority's ability to pay salaries and fund public services.

• An Israeli Shekel liquidity crisis, which has restricted financial transactions, limited cash circulation, and created widespread payment delays.

Adding to these hardships are rising incidents of Israeli settler violence, the destruction of Palestinian refugee camps, and the expansion of settlement construction, all of which have disrupted agricultural and industrial livelihoods, deepened displacement, and weakened investor confidence.

Soaring Unemployment and Plunging Incomes

Labour market indicators paint an equally grim picture. As of early 2025, unemployment in the West Bank reached 31.7 per cent for men and 33.7 per cent for women, one of the highest rates in the region's recent history. The report notes that real per capita income in the West Bank has dropped by more than 20 per cent since 2023, reflecting both lost wages and inflationary pressures.

Projections for the full year of 2025 are even more alarming: unemployment is expected to rise to 38.5 per cent, affecting roughly 363,500 people. The decline in formal sector employment and the contraction of small businesses have pushed more workers into informal and precarious jobs, often without social protection or stable earnings.

ILO economists warn that these developments are not only worsening poverty but also eroding the productive capacity of the West Bank's economy, which relies heavily on services, construction, and trade — sectors now paralyzed by access restrictions and liquidity shortages.

Deepening Poverty and Social Fragility

The combined effects of the Gaza war, financial blockades, and movement restrictions have plunged large segments of the Palestinian population into economic insecurity. Families are struggling to meet basic needs amid skyrocketing prices for food, transport, and housing.

The ILO brief emphasizes that livelihoods have been decimated, with ripple effects across households and communities. Many families that relied on remittances from workers employed in Israel have lost their primary income source, while small enterprises have closed due to cash shortages and disrupted supply chains.

The war's psychological and social toll has also been immense, with displacement, trauma, and uncertainty affecting productivity and participation in the labour market. The crisis has widened gender and youth employment gaps, as young people and women remain disproportionately affected by job losses.

Call for Urgent Action and Structural Reform

"This report is a stark reminder of how the two-year war in Gaza has severely impacted the West Bank, undermining Palestinian livelihoods, businesses, and the overall economy," said Ruba Jaradat, ILO Regional Director for Arab States.

She urged immediate and coordinated efforts to stabilize the economy and protect workers' incomes:

"In the context of the ceasefire, urgent measures are needed to sustain jobs and businesses, support incomes, and strengthen social protection. But beyond emergency relief, long-term structural reforms and renewed international support to the Palestinian Authority are essential to rebuild inclusive and sustainable resilience."

The ILO recommends several short- and medium-term interventions, including:

• Reinstating Palestinian workers' access to jobs in Israel, with adequate safeguards.

• Releasing withheld revenues to restore liquidity to the Palestinian Authority.

• Scaling up social protection measures to protect vulnerable workers.

• Investing in local enterprise recovery to stimulate employment in manufacturing, agriculture, and services.

• Promoting financial system stability to ease liquidity pressures and support small businesses.

A Path Toward Economic Recovery and Resilience

The ILO's Gaza War Impact Series aims to provide data-driven insights to guide national and international policy responses. Bulletin No. 6 builds on earlier analyses that tracked employment and output trends in Gaza, highlighting how interlinked the economies of Gaza and the West Bank truly are.

Experts warn that rebuilding the Palestinian labour market will require more than emergency relief; it will demand a comprehensive recovery framework rooted in sustainable growth, decent work, and economic independence.

The ILO has reaffirmed its commitment to working with the Palestinian Authority, employers' organizations, trade unions, and international partners to support reconstruction and decent work creation under the principles of social justice, equality, and human dignity.

A Regional and Global Responsibility

The continued deterioration of livelihoods in the West Bank highlights the urgent need for international solidarity and coordinated humanitarian support. The report calls for donors and development partners to help finance job creation programs, restore public sector stability, and strengthen social protection systems.

As Ruba Jaradat emphasized:

"The resilience of Palestinian workers and enterprises is remarkable, but resilience alone cannot sustain livelihoods indefinitely. The international community must act decisively to restore economic normalcy and uphold the right to decent work and social justice in the Occupied Palestinian Territory."

Rebuilding Hope Amid Adversity

Despite the immense challenges, the ILO underscores that recovery is possible — provided that stability, mobility, and fair access to resources are restored. A ceasefire, coupled with strong economic governance and international engagement, could pave the way for a more inclusive and sustainable Palestinian economy.

Until then, the two-year Gaza war remains not only a humanitarian tragedy but also an economic catastrophe whose full repercussions are still unfolding across the West Bank — a region striving to rebuild lives, livelihoods, and hope amid one of the most severe crises in its modern history.