The Palestinian economy in Judea and Samaria (commonly referred to as the West Bank by Palestinian leaders) has been a precarious one, largely dependent on Israel for stability, employment, and basic economic functions. However, since the eruption of the Gaza war in October 2023, this already fragile economy has entered a state of accelerated deterioration, putting immense pressure on the livelihoods of the Palestinian population. This crisis threatens to ignite widespread unrest as external actors such as Hamas and Iran exploit the situation through both financial and military support, intensifying their incitement against Israel and the Palestinian Authority (PA).

Economic Stranglehold and Policy Responses

Israel, in response to the ongoing conflict, has imposed a series of economic measures targeting the PA, further aggravating the region's economic distress. These measures include halting the transfer of tax revenues earmarked for Gaza (in addition to withholding funds that the PA directs to the families of terrorists and prisoners) and closing the Israeli labor market to Palestinian workers. This move has severely disrupted the already fragile economic environment in Judea and Samaria, where economic activities have ground to a near halt.

The impact of these measures has been dramatic and swift. Data shows that while the Palestinian economy exhibited modest growth earlier in the year, with a GDP increase of 4% in the first three quarters of 2023, the onset of the Gaza conflict triggered a staggering 19% decline in GDP in the last quarter alone. This collapse wiped out all gains, resulting in a 2% overall contraction of GDP for the year, with GDP per capita plummeting by approximately 4.5%. The first nine months of 2024 have continued to reflect this downward spiral, with all indicators pointing towards a worsening economic outlook.

The Cost of Security Operations

The Israeli Defense Forces' (IDF) ongoing operations in terror-plagued Palestinian cities, particularly in northern Samaria, have also contributed to this economic malaise. These operations, aimed at dismantling terrorist networks, have imposed significant movement restrictions, disrupting the daily lives of thousands. Workers have been unable to reach their jobs, transportation costs have surged, and the overall environment has become increasingly hostile to both local and foreign investment. Businesses have reported severe shortages of production inputs and consumer goods, painting a grim picture of a crippled economy.

A survey conducted in early 2024 revealed that a staggering 99% of businesses in Judea and Samaria have suffered since the start of the conflict on October 7, with 97% reporting a sharp decline in sales, prompting widespread layoffs. Before the war, the Israeli labor market was a lifeline for between 150,000 and 200,000 Palestinian workers, both legal and illegal. Their incomes were a cornerstone of the Palestinian economy, fueling consumer spending and economic growth. However, since the war began, over 80% of these workers have been cut off from their jobs, resulting in an economic vacuum that threatens to decimate the region's GDP by nearly 30% this year.

If Palestinian-Americans truly cared about Palestine, they’d invest in it, criticize its leaders, and demand a 2-state solution. Like most Jewish-Americans relate to 🇮🇱.

— Lee GAY-GAY-GAY🇺🇸🌻🏳️‍🌈🇮🇱✡️🐝✈️🚊🚗🚲🇺🇦 (@Lee4Pete) September 3, 2024

A Surge in Unemployment and Economic Despair

The impact on employment has been catastrophic. Approximately one in four jobs in the private sector of Judea and Samaria has been lost, resulting in around 144,000 workers being thrown out of employment. The unemployment rate in the region skyrocketed to 32% in the fourth quarter of 2023, up from just 13% in the previous quarter, underscoring the severe economic contraction and social strain that has gripped the region.

Despite these grim realities, and contrary to the hopes of Hamas and other extremist factions, there has not yet been a full-scale uprising or "intifada" in response to the economic hardship. Most households in Judea and Samaria have so far managed the drop in income by taking out loans, selling off gold and other assets, and finding other means to weather the economic storm rather than channeling their frustration into violent confrontation with Israel.

Rising Threats and the Potential for Unrest

However, the absence of widespread unrest does not mean the situation is stable. Terrorist organizations are gaining strength, with new "battalions" emerging in various cities across Judea and Samaria. These groups have been busy establishing explosives laboratories capable of producing more powerful devices than seen in previous conflicts, and there has been a marked increase in individual terror activities.

Paying off families of terrorists is expensive business

In 2016, the Palestinian Authority issued $315 MIL in Pay for Slay payments, or 8% of the PA budget

Since July, the EU transferred 400 MIL EUR to the PA to help address its budget problems

How kind of EU tax payers pic.twitter.com/tAajGkgC0G

— LogicForAll (@ebelotseNYC) August 30, 2024

The potential for a broader conflict remains, with economic despair serving as a potent fuel. Historical precedent warns that such volatility can be triggered by seemingly minor incidents, especially when amplified by incendiary rhetoric on social media and other platforms. The current landscape in Judea and Samaria is one of a ticking time bomb, where the right spark could lead to an explosion of violence and unrest, exacerbating an already dire economic and social situation.

Israel, the PA, and the international community must navigate this precarious situation carefully, balancing security needs with humanitarian considerations to prevent the region from descending into further chaos. The stakes are high, and the margin for error is perilously slim.