Tensions mount as economic crisis grips West Bank

The World Bank estimates the West Bank's GDP could fall by 6% this year, while the ILO says 32% of jobs have already been lost.

There is growing unemployment after Israel revoked work permits and withheld tax revenue from the PA. Meanwhile, it continues its brutal war on Gaza, heightening emotions at a tense time.
Al Majalla
There is growing unemployment after Israel revoked work permits and withheld tax revenue from the PA. Meanwhile, it continues its brutal war on Gaza, heightening emotions at a tense time.

Tensions mount as economic crisis grips West Bank

In the Occupied West Bank, the magnitude of the economic and social crisis sweeping Palestinian streets is glaring.

Although store shelves are piled high with goods, demand has sharply declined as prices rise and incomes fall. Things are so unstable that prices can sometimes be different at the end of the day than at the start.

Things were bad before October 2023 but have deteriorated significantly since Israel's war on Gaza. Palestinians in the Occupied West Bank are gripped with fear as an approaching economic crisis looms.

The World Bank estimated the West Bank's GDP could fall by 6% this year, while the International Labour Organisation said 32% of jobs have already been lost.

Work permits revoked

One big reason is that more than 100,000 Palestinians had their work permits in Israel revoked, leaving them unemployed overnight.

There are no accurate statistics for the number of Palestinians who worked in Israel before the war because tens of thousands worked there illegally.

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Palestinian labourers working in Israel.

However, the withdrawal of their work permits on 8 October led to a sharp drop in income and a sharp increase in unemployment.

Badawi Abu Juwayed — a resident of the Dura area in Hebron who worked in construction in southern Israel — is one of thousands of Palestinians who lost his job.

"I am spending from my savings, which isn't much," he tells Al Majalla.

Construction workers like Badawi were paid weekly or monthly wages from contractors in Israel. He says he and his family currently live "hand-to-mouth".

"We don't know what will happen," he says. "If the war continues, we will face certain poverty if we don't get our jobs back."

Banks — which have had to write off $1bn in lending to Gaza since the war — have seized homes over failure to repay loans. Meanwhile, some families are unable to afford medical treatment for their children.

More than 100,000 Palestinians had their work permits in Israel revoked, leaving them unemployed overnight.

Bleak opportunities

Badawi's story is the same as thousands of Palestinians who worked in Israel. After graduating from university in 2005, he went to work in Israel because public sector wages in the West Bank are very low.

The average salary of a Palestinian public sector employee is three times less than the wages that Palestinians get for working in Israel. This has led to a brain drain in Palestinian territories.

The Ma'an labour union in Israel provides thousands of Palestinian workers with legal support and advice. Speaking to Al Majalla, Ma'an manager Asaf Adeeb likens the wait for the lifting of Israel's entry ban to a traveller waiting for a train at the station.

Palestinians are eager to resume work and hope for any good news to this end. However, calls by trade unions and human rights groups for the Israeli government to allow Palestinian workers to return have fallen on deaf ears, Adeeb says.

This is despite warnings from Israel's security agencies that the continued prevention of Palestinian workers from entering Israel will lead to a state of unrest in the Palestinian streets, culminating in a security escalation and great tension in the West Bank.

Calls to allow Palestinian workers to return to work in Israel have fallen on deaf ears despite warnings from state security agencies that unemployment could ramp up tensions in the West Bank.

Ma'an estimates the total number of Palestinians from the West Bank who work in Israel at 200,000, around 120,000 of whom hold official permits. About 40,000 workers are employed in illegal Israeli settlements in the occupied West Bank.

Men aged 55+ and women aged 50+ do not need permits, and thousands of Palestinian workers in Israel fall into these age brackets, Adeeb adds.

In addition, some are granted temporary permits to work or find work in Israel, as well as those who enter illegally through gaps in the separation wall or through agricultural land behind the wall.

Palestinian workers walk near a forest after crossing illegally into Israel to reach their workplaces on February 17, 2021.

High prices, vanishing wages

The salaries of Palestinians who work in Israel or the settlements inject about $3.5bn annually into the Palestinian market, says Adeeb. It accounts for around 20% of the overall national income.

Unemployment will only exacerbate the economic crisis in the occupied West Bank. Official efforts to have pension funds transfer retirement allocations to workers are not helping to stave off rising poverty.

According to Adeeb, Israeli law allows employers to infringe on the rights of Palestinian workers – such as terminating their employment for 'security reasons' without notice.

Figures from the Palestinian Monetary Authority show that 4% of cheques now bounce due to insufficient funds. It cited the economic repercussions of the war in Gaza.

Data from the Palestinian Central Bureau of Statistics show how the war has led to price rises, continuing a two-year upward trend following the pandemic and war in Ukraine.

According to the Central Bureau of Statistics, Palestine's gross domestic product (GDP) was down by 22% in the West Bank, while the unemployment rate rose to 29%. It is likely to increase further if the war continues.

The dependency of the Palestinian economy on Israel, along with corruption and mismanagement, has contributed to its decline over the years.

Dependency problem

Walid Habbas, a researcher at the Palestinian Forum for Israeli Studies (MADAR), highlights the issue of tax collection as another contributing factor to the economic crisis in the occupied West Bank.

A PhD candidate at the Hebrew University of Jerusalem, Habbas explains that Israel collects tax for the Palestinian Authority — known as clearance funds — but deducts large amounts from them.

The dependency of the Palestinian economy on Israel, along with corruption and mismanagement, has contributed to its decline over the years, he says.

Since its occupation in 1967, Israel has sought to "seize Palestinian lands, settle in them, and divide them into scattered communities that are easy to control," he says.

Israel's separation wall.

Israel exerts control over Palestinians using various tools and subordinates the Palestinian economy to its own, he explains.

"The need for Palestinians to work in Israel continued beyond the Oslo Accords and Paris Agreement because they did not guarantee Palestinian economic independence or create alternative workplaces in Palestinian territories," says Habbas.

"In addition, trade remains dependent on Israel, which is the Palestinian Authority's main trading partner and sometimes controls the type of goods that are allowed into the West Bank using security criteria."

Taxes withheld

The Palestinian Authority's budget relies on clearance funds and tax revenue collected by Israel from Palestinian traders who import goods from Israel and pay tax on them. Israel sets conditions for the transfer of funds to the Palestinian Authority and deducts percentages from the salary allocation.

Currently, Israel is withholding tax revenue to the PA.

Habbas predicts conditions will continue to worsen into the summer, but its full impact can only be calculated when Israel's war on Gaza finally ends. Only then can the extent of its damage and destruction be surveyed.

The critical infrastructure needed to sustain life in Gaza has been decimated. Unemployment, already high, will now be higher, and an end to the 17-year Israeli blockade on the Strip is further than ever.

In short, the prospects for the economy of both Gaza and the West Bank are grim, leaving Palestinians on either side of Israel in a desperate situation.

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