West Bank and Gaza: Selected Issues

This Selected Issues paper focuses on economic divergence in West Bank and Gaza. Years of isolation and continuous conflicts have left Gaza’s economic development far behind that of the West Bank. In 2022, per capita income in Gaza was only a quarter of that in the West Bank, and unemployment and poverty rates were much higher. This reflects much lower employment and investment rates as well as considerably lower productivity growth. While Israeli-imposed restrictions on access and movement of labor and goods severely hinder trade outcomes and productive capacity in both West Bank and Gaza, restrictions are far more severe for Gaza. As a result of this Gaza blockade and repeated wars with Israel since 2008, the capital stock is stagnant and infrastructure is derelict (especially electricity). Analytical work suggests sizeable economic gains from boosting Gaza’s electricity infrastructure. Prospects for declining donor aid risk worsening Gaza’s humanitarian crisis. Under these conditions, Gaza is unlikely to meet the U.N. 2030 Sustainable Development Goals. A major easing of the blockade and financing constraints is necessary to improve prospects, provided the security situation can be assured in parallel.