Economy of Palestine

Palestine has a developing economy that relies heavily on financial aid from various international donors, such as governments and international organizations. The country's exports amount to about US$1 billion, while imports are valued at US$6 billion. The service sector is the largest part of the economy, followed by wholesale and repair, manufacturing, and agriculture.

Tourism in Palestine centers around cities like Bethlehem and Jerusalem, while major economic centers are found in Ramallah and Hebron. Foreign aid supports the Palestinian Authority and public services, and money sent home by the Palestinian diaspora also helps the economy. However, the economy still depends a lot on support from places like UNRWA, Qatar, Turkey, the European Union, and non-governmental organizations.

In Gaza, people face challenges moving goods and services because of the Israeli blockade. About 100,000 Palestinians work for Israeli companies, but they are paid much less than typical Israeli workers.

History

The Palestinian economy has gone through many changes over time. From 1968 to 1980, the amount of goods and services produced for each person grew by 7% each year. By 1991, people lived longer, fewer babies died, and more homes had electricity and clean water.

In the early 1990s, the economy in the West Bank and Gaza struggled because of rules set by Israel after attacks there. This made it hard for people to find jobs, and unemployment went up from under 5% in the 1980s to over 20% by the mid-1990s.

During World War II, Palestine saw economic growth due to its role in British military operations, including building roads and handling supplies. After the war, Palestine was one of the most advanced countries in the Middle East. People found jobs in construction, farming, and other industries.

In the 1970s and 1980s, many Palestinians worked in Israel, which helped their economy. But the first Intifada, a protest against Israeli rule from 1987 to 1993, caused problems like closures and restrictions, hurting the economy. The Oslo Accords in the 1990s created the Palestinian Authority, which took control of some areas, but progress was slow.

After 2000, the economy faced more challenges, including restrictions on movement and changes in leadership. In 2013, trade between Israel and the Palestinian territories was worth about US$20 billion.

Sectors

Agriculture

Main article: Agriculture in Palestine

Agriculture is very important to Palestine's economy. It helps feed the people and supports exports. About 13.4% of people work in farming directly, and many more depend on it indirectly. Farmers grow crops on around 183,000 hectares of land, with olives being a big part of this. Olive products are one of Palestine's biggest export earners.

However, farming faces many challenges. There are difficulties in selling crops and getting necessary supplies. Land is sometimes taken for other uses, and there are barriers that make farming harder in some areas.

High tech

During the 2000s, a technology sector grew in Palestine, helped by its closeness to Israel. By 2013, about 4,500 people worked in technology jobs, mainly in software and communication development. The tech industry grew from 0.8% of the economy in 2008 to 5% in 2010. Companies like Cisco have helped start this growth.

In 2017, there were 241 active tech start-ups creating jobs and drawing investment. The tech sector continues to grow, with many new businesses and support programs available.

Traditional industries

Main article: Palestinian handicrafts

Palestine has a long tradition of making handmade goods like embroidery, pottery, soap, glass, weaving, and carvings from olive wood and mother of pearl. Cities such as Bethlehem, Hebron, and Nablus are known for their special crafts, which are important for local economies.

Stonecutting is also a traditional job. Workers cut beautiful stones into bricks and tiles, known as Jerusalem stone, which are used in building.

Tourism

Main article: Tourism in Palestine

In 2010, about 4.6 million people visited Palestine, with many coming for short trips. Tourism has grown, but faces challenges due to restrictions on movement. Efforts are being made to attract more visitors, with new hotels and attractions being developed.

Large international hotel brands operate in Palestine, including Intercontinental Jacir Palace, Seven Arches Hotel Intercontinental, Marriott Gaza (later Al-Mashtal), and Millennium Palestine Ramallah Hotel.

Oil and gas

Main article: Energy in Palestine

Palestine has large amounts of oil and gas, but cannot access them due to occupation. Estimates suggest there are over 3 billion barrels of oil off the coast and under the land. The Levant Basin in the Mediterranean may hold more oil, and there are significant reserves under the West Bank.

There are also natural gas reserves in the Gaza Strip, discovered in 1999. However, development of these resources has been delayed due to ongoing conflicts. Some believe that controlling these resources adds complexity to the Israel-Palestine conflict.

Infrastructure

Communications

Main article: Communications in Palestine

In 2016, experts noted that rules set by Israel made it hard for communication companies in the West Bank to grow. These rules stopped companies from working in many areas, limited new technology, and made it difficult to connect to the internet. This slowed down progress and cost a lot of money.

Transport

Main article: Transport in Palestine

Water supply and sanitation

Main article: Water supply and sanitation in Palestine

By sub-region

West Bank

In 2007, the economy in the West Bank started to get better slowly. By 2008, jobs became more available, and wages went up. Tourism in Bethlehem grew a lot, and life expectancy reached 73.4 years.

New businesses opened, like a Small Enterprise Center in Bethlehem in 2008, which helped people learn new skills.

By 2009, the economy grew even more, with new shopping places and plans for a modern city called Rawabi.

In 2010, Ramallah became a busy place for business because of better safety and fewer problems with unfair money use.

East Jerusalem

East Jerusalem used to be a busy shopping place, but after security checks and barriers were put up, it became harder for people to visit. This made it tough for businesses to do well, and many people there became poor.

Gaza Strip

Main article: Economy of the Gaza Strip

Because of rules set by Israel and changes in leadership, many people in Gaza have had a hard time finding jobs and making money. Help from groups like the UN has been important.

In 2010, things started to get a little better, with new shops opening and more building happening. However, many people still struggle, with most living below the poverty line in 2022.

Currency

Further information: Palestine pound

Because of special rules, the people of Palestine cannot have their own money. Instead, they mainly use the Israeli new shekel for everyday buying and selling. In the West Bank, some people also use the Jordanian dinar for saving money or buying big, lasting things. The United States dollar is sometimes used too, especially for saving or buying things from other countries.

The Palestinian Monetary Authority, which works like a bank for Palestine, cannot print its own money. This makes it hard for them to control money matters well. Using many different kinds of money also makes things more expensive and less easy because the value of these monies can change.

In the Gaza Strip, the Israeli shekel is also used most often, but there isn’t enough of it because of limits put in place by nearby countries.

Taxation

Main article: Taxation in Palestine

In the Palestinian territories, there is a complex system of taxes. Both the Palestinian Authority and Israel collect taxes. In 2005, the Palestinian Authority collected about $34 million each month from taxes and other charges. Israel collected around $75 million monthly from tariffs on foreign imports and value added taxes on Israeli goods and services. On average, Israel kept about $15 million to pay for water and power bills for Palestinians, and sent the remaining $60 million to the Palestinian Authority. Since 2006, when a new government formed in the Palestinian Authority, Israel has often held back the taxes it owes to the Palestinian Authority.

Employment

The farming part of Palestine's work helps many people, but many others find jobs in other ways that are not officially counted. For the past ten years, jobs have been hard to find, and farming has become a part of Palestine that has less money.

Because jobs are hard to find in Palestine, about 100,000 people from Palestine went to work in Israel. By March 2014, around 45,000 work permits were given for jobs in Israel, and another 25,000 for jobs in places called West Bank settlements. Some people worked without permits. Rules about who can get a permit have changed, making it easier for younger people to get jobs in Israel.

Working in Israel means people earn more money. In 2013, daily pay in Israel was almost twice as much as in the West Bank and more than four times as much as in Gaza. By 2022, the smallest monthly pay in Palestine was ₪1,450, which is much less than the smallest pay in Israel, ₪5,300. While some rules from Israel help workers in the West Bank, sometimes employers do not follow the rules, like not paying workers on time or hiding how many hours they worked.

Foreign aid

Main article: International aid to Palestinians

In 2008, the economies of the West Bank and Gaza relied a lot on help from other countries. This help was worth about 1.8 billion dollars and made up around 30% of everything the area made in a year. This aid helped provide important services for many people and allowed the Palestinian Authority to pay its workers.

Later, in 2010, some Arab countries stopped giving as much money. By August of that year, the Palestinian Authority had received about $583.5 million, but only a small part of that came from Arab countries. The rest came from places like the European Union and the United States. In 2011, leaders asked for $5 billion more to help the economy grow. There was also a plan in 2013 to bring in $4 billion to support the economy, but it did not go forward because peace talks between Israelis and Palestinians did not succeed.

Israeli–Palestinian relations

Further information: Israel–Palestine relations

Commerce

Olives of Peace is a project where Israelis and Palestinians work together to sell olive oil. Through this project, people from both sides have done training and planning together. The oil is sold under the name "Olives of Peace." There are plans for a joint industrial zone that would help connect the two areas. Palestinians could make and sell handicrafts, and there are ideas for a language center where people could learn each other’s languages and share parts of their cultures.

In 2011, trade between Israel and the areas ruled by Palestinians reached $4.3 billion. Israeli exports to these areas were $3.5 billion, and Palestinian exports to Israel were $816 million. Experts from both sides met in 2012 to talk about ways to improve business between them. By 2013, trade between Israel and the Palestinian Authority was worth about US$20 billion each year. This growing trade led to the creation of the Jerusalem Arbitration Center, a place to solve business disagreements between Israelis and Palestinians.

Conflict

See also: Israeli–Palestinian conflict § Agriculture

In 2006, the Palestinian economy faced big changes after a split between two groups, which led Israel to stop direct connections between the West Bank and Gaza. A war in 2008–2009 damaged much of the buildings and jobs in Gaza, leaving the economy struggling. The Oslo Accords in 1993 tried to help, but the economy still faced many problems. Today, the Palestinian economy depends on help from other countries and money from trade with Israel. However, limits set by Israel make it hard for the economy to grow. By 2008, many people in Gaza had no jobs. These limits have cost the West Bank economy a lot of money and made it harder to build and farm. For the economy to get better, these limits need to be lifted.

Macroeconomic data

The following table shows the main economic indicators from 1994 to 2023. Inflation rates below 5% are shown in green.