West Bank Unemployment Hits 30% as Palestinian Economy Strains Under War
Economic analyst Doron Peskin discusses how the closure of the Israeli market to Palestinian workers and banking crises have pushed West Bank unemployment to 30%, though the economy is holding on.
In a new episode of the podcast "Axis of Money", economic analyst Doron Peskin discussed the economy behind the escalation in the West Bank and the soaring unemployment rate among Palestinians. The economic distress of the Palestinian Authority began even before October 7, but the fatal blow came in the shadow of the war with the closure of the Israeli market to Palestinian workers.
The Collapse of the Labor Market
"The Israeli and Palestinian economies are intertwined," Peskin says. "According to Israel's official figures, about 180,000 Palestinians worked here on the eve of the war. According to various estimates, some coming from the Palestinian press, the figure stood at about 200,000 to 205,000. Today, according to Palestinian data, we stand at about 50,000 workers who have returned to work in Israel and the West Bank areas, after being carefully vetted by the Shin Bet. That means only about a quarter of the workers have returned to the market."
Estimates indicate that a Palestinian worker in Israel earns about 260 shekels per workday, compared to 130 to 135 shekels per workday in the local market within the Authority's territories. "This naturally explains the motivation to go out and work in Israel," Peskin says.
«Before the war, work in Israel contributed about 1.5 billion dollars a month to the Palestinian economy. This is a tremendous sum, about 20% to 25% of the Palestinian GDP, and in a single moment it ended.»
Given the political and security situation in Israel, the Palestinian Authority also understands that the labor market will not return to what it was before October 7. "The Palestinian market does not create enough jobs, and that is what leads us to the current situation," Peskin notes. According to Palestinian data, the unemployment rate stands at about 28% to 30%, but among young people and graduates aged 20 to 29, unemployment figures are even higher, close to 40%, and among women, unemployment exceeds 50%.
Snowball Effect and Banking Crisis
Another difficulty complicating economic activity in the territories is the fact that Israeli banks operating with Palestinian banks demanded the severing of relations. "The dependence of Palestinian banks on Israeli ones is massive. Until a few weeks ago, the Israelis wanted to sever relations, and the state stopped it at the last minute and ruled that relations will continue until the end of 2026," Peskin says. "The Palestinians do not have their own currency, and all economic activity is conducted in shekels. Israel refused, until recently, to accept shekels from the Palestinians. 95% of Palestinian exports pass through Israel, and 65% of imports. The moment Israel stops relations, the Palestinians get stuck with a mountain of cash without the ability to use the money."
Despite the extension of the banking cooperation agreement, the Palestinian Authority's finance minister warned of a possible collapse. However, Peskin concludes: "Despite the declarations, the Authority's economy is holding on, and according to field indications, it is far from collapsing."
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