In 2020 and 2021 the occupied Palestinian territory witnessed several waves of the COVID-19 pandemic beginning in early March 2020. The subsequent series of lockdowns imposed by the Palestinian National Authority (PNA) sharply curtailed economic activity.

According to the latest UNCTAD report on its assistance to the Palestinian people, the pandemic, combined with other negative occupation-related developments, make 2020 the worst year for the Palestinian people since the establishment of the PNA in 1994.

“Recovery in 2021 and beyond hinges on actions that will be taken (or not) by the occupying power and the scale of donor support,” the report says.

COVID-19 hit an already battered economy

Just over a month into the pandemic, the Palestinian GDP contracted by 4.9% in the first quarter of 2020 compared to the previous quarter.

The second quarter was the worst, as all key economic indicators nosedived: GDP contracted by 18%, two thirds of establishments completely shut down, unemployment soared to 39%%, while investment, export and imports fell significantly.   

The crisis engulfed all sectors of the economy, including tourism, construction, services, industrial and agricultural sectors. Overall, in 2020, the Palestinian economy contracted by 11.5%, its second-largest contraction since 1994.

Unemployment rose to 26% even as labour force participation rate declined from a low 44% to an even lower 41% between 2019 and 2020.

UNCTAD’s report emphasizes that even before the onset of the COVID-19 shock, the Palestinian economy was in disarray and the overall politico-economic environment had been deteriorating in recent years.

The economy’s productive base had been battered and in utter disrepair, geographical and market fragmentation were deepening and restrictions on imported factors of production and technology had been exacting a heavy toll on productivity.

Loss of land and natural resources to settlements continued unabated, fiscal resources were leaking continuously to the Israeli treasury and the regional economy of Gaza has been impacted by a prolonged blockade and recurring military operations.

Annexation threat further aggravates conditions

Furthermore, the threat of de jure annexation of large swathes of the West Bank by the occupying power escalated.

In April 2020, amid the worst global health crisis in a century, the occupying power announced plans to annex more parts of the Palestinian land in the West Bank.

The Palestinian government responded by halting all bilateral contacts and refused to receive the fiscal (clearance) revenues Israel collects on its behalf from Palestinian international trade.

The suspension triggered a fiscal crisis that deprived the PNA of 68% of its fiscal revenues for half the year until the transfer of funds was resumed in November.

In April 2021, with the eruption of violence in response to Israeli authorities’ threat to evict Palestinian families from their homes in East Jerusalem, the Palestinian economy suffered another shock. The violence soon spread to the rest of the West Bank where many Palestinians were injured or killed.

Life worsens for a people subject to mobility restrictions since 2000

Meanwhile, in Gaza, the pandemic hit at a particularly difficult time of disintegrating hygiene and public healthcare infrastructure, deep poverty, insecurity, and recurring military confrontations.

In May 2021, hundreds of airstrikes conducted by the occupying power destroyed and damaged valuable assets, including numerous hospitals and primary health-care centres, commercial and residential buildings, and educational facilities.

Restrictions on the mobility of people, goods and economic activity have affected the Palestinian people and their economy since 2000, when the occupying power introduced a closure policy featuring a complex system of mobility control. Meanwhile, since 2007, Gaza has been under tight blockade. 

“Despite the severity of the pandemic shock, occupation remains the major impediment to development in the occupied Palestinian territory,” the report says.

Settlement expansion erodes possibilities of the two-state solution

Since 1967, the occupying power launched a long-term policy aimed at the establishment of settlements in the occupied West Bank.

It has spent billions of dollars to build modern infrastructure for settlement expansion, including systems of roads, water, sewage, communications, power, security, educational and health-care facilities. Generous incentives have been provided for settlers and entrepreneurs to relocate and multiply.

Meanwhile, the demolition of Palestinian structures and productive assets to maximize the space for settlement expansion has created a coercive environment that pushes Palestinians out of their land.

Despite the pandemic-induced slowdown in human activity in the region and around the world, 2020 registered the highest number of demolitions and displacement of Palestinians in recent years.

In 2020, the occupying power targeted 848 Palestinian-owned properties across the West Bank. The demolitions and seizures displaced hundreds of Palestinians and magnified the impact of the COVID-19 pandemic and the associated requirements such as shelter, social distancing and access to medical and other services.

Furthermore, in April 2020, Israel announced plans to formally annex parts of the West Bank. Although formal annexation was postponed in August 2020, the reality on the ground has not changed.

The occupying power continues to treat settlements as practically part of its sovereign territory and creeping de facto annexation continues to accelerate as evidenced by the intensification of the construction of settlements to levels not seen in a decade.

In 2020, the occupying power approved or advanced more than 12,150 homes in settlements, the highest since 2012.  In 2021, Israel had managed to establish more than 280 settlements in the West Bank, including East Jerusalem. The settler population grew up from 198,315 in 2000 to more than 650,000 in early 2021.

As affirmed by UN Security Council resolution 2334, establishment of settlements in the West Bank constitutes a flagrant violation under international law.

Impact of settlements on Palestinian people

Settlements dispossess the Palestinian people of their land, natural resources as well as their inalienable right to development, entrench occupation and pre-empt a meaningful sustainable two-state solution, the UNCTAD report warns.

According to the report, the environmental impact of settlements is serious. The occupying power transfers large quantities of hazardous materials and e-waste every year for processing in the West Bank, where its own regulations and monitoring are less stringent than those applied within its borders.

Pollution from the informal e-waste sector and unregulated industries is already affecting human health, particularly the health of children. Occupation further undermined the environment by the destruction of millions of olive and other trees to make room for settlement growth.

Born within a constrained policy-framework that has been deteriorating, the PNA has been saddled with responsibilities far greater than the resources and policy space at its disposal.

Until occupation is ended, there is no substitute for adequate support from donors and the international community for rebuilding the shattered physical and institutional infrastructure, and the fragile health-care system.

For international support to translate to genuine progress, all the restrictions imposed by occupation on the Palestinian economy should be lifted, the report concludes.