Israel’s wartime curbs ravage West Bank economy

For two months, 65-year-old businessman Osama Amro was too nervous to leave the city of Ramallah, the economic heart of the occupied West Bank.

In response to Hamas’s deadly October 7 attack, Israel has accompanied its siege of Gaza with a blockade of a different kind in the West Bank — shutting checkpoints between Palestinian cities, choking the flow of goods and workers between them, and frequently leaving people stranded.

“I never left Ramallah for two months and I used to travel every month outside the country,” said Amro, whose businesses include solar farm installation, construction and a mechanic garage. “I’m afraid to tell you the truth . . . [I] might not be allowed to come back.”

The restrictions on movement — accompanied by military raids — are part of a series of steps by Israel’s government in response to Hamas’s attack that have severely disrupted the West Bank’s economy. Settlers in the occupied areas have also launched their own attacks. More than 300 Palestinians have been killed, mostly by the Israeli military, in the West Bank and East Jerusalem since October 7, according to the UN.

Since the war began, Israel has almost entirely stopped allowing Palestinians from the West Bank to enter Israel for work, and throttled the flow of Palestinian citizens of Israel entering the West Bank to shop. Some Palestinians have also become too afraid to move around of their own accord.

At the same time, Israel has withheld tax revenues that it collects on behalf of the Palestinian Authority, which rules parts of the territory.

Israeli officials say that the restrictions on movement are a response to “imminent Palestinian terror threats” against Israelis in the West Bank, and that cities formally under PA control, such as Jenin, Nablus and Tulkarem, were “hubs” for militants. “Israel has zero tolerance for terror and will confront it without compromise,” said a senior official.

But the International Labour Organization said this month that the pressures were taking a huge toll, estimating that 32 per cent of employment — or 276,000 jobs — had been lost in the West Bank since the start of the war, and that the territory suffered economic losses of $500mn a month in October and November.

The measures have also left the PA, which employs tens of thousands of people, struggling to pay salaries, undermining its position just as diplomats are racing to shore up the stability of the West Bank — and as the US and other countries are pushing for the authority to play a central role in Gaza’s post-war governance.

“[The economic pressure] undermines the rationale for the PA in people’s minds,” said Raja Khalidi, director-general of MAS, a West Bank-based economic think-tank.

“It creates social and political internal tensions . . . The government’s role as one of the main employers and one of the main service providers in the West Bank is being increasingly impaired.”

Map of Israel and West Bank, showing key locations including Ramallah, Nablus, Tulkarem and Jenin

Start-ups with less of a buffer than established businesses have been particularly hard hit by the economic turmoil. Shadha Musallam, an agriculture technology entrepreneur, lost an important pitching slot at an event she had qualified for in Morocco because she was unable to physically leave the West Bank. 

She had hoped to raise $500,000 to keep her start-up Agritopia, which builds technologies to help farmers, alive for the next 18 months. Now, she says Agritopia might make it through the first three months of 2024 — but only if it keeps spending to a bare minimum. She has had to postpone agricultural data collection because attacks by settlers have made her afraid to deploy field workers.

“As a company you have to seize the chances you can find, and because of the political situation I am losing a lot of opportunities.”

Businesses are also struggling to adapt to the decline in Palestinian citizens of Israel coming to the West Bank to shop. Nasr Abdul Karim, a Ramallah-based economist, estimated that Palestinians living in Israel usually spent about Shk1bn ($277mn) per year, representing a significant source of liquidity. 

A woman holds a sign calling for the boycott of Israeli products during a demonstration in Ramallah on Boxing Day

Meanwhile, the decision by Israel’s government to reduce transfers of the tax it collects on the PA’s behalf, by removing the share of funds that would have been transferred to PA employees in Gaza, has caused “very harsh fiscal stress” for the Palestine Monetary Authority (PMA), said Abdul Karim.

In parallel with the economic slowdown, the cuts — coming on top of previous allocation reductions by Israel — had left the PMA “crippled financially”, Abdul Karim said, while unpaid government contracts and slashed salaries had worsened a “cash crunch” in the territories.

Those cuts form part of Israel’s response to the devastating October 7 attack by Hamas militants from Gaza, who Israeli officials say killed about 1,200 people and took more than 200 hostage, dozens of whom remain in captivity. The Israeli military has also launched a ferocious bombardment and ground offensive in Gaza in which at least 21,100 people have been killed, according to health officials in the strip.

A Palestinian man inspects damage to a money exchange shop after a raid by the Israeli army

The cash crunch is visible in Ramallah, where shopkeepers said customers were spending much less and postponing events such as weddings, while more people were begging for food. 

“Business is down 70 per cent,” said a cashier in a family-owned sweet shop who asked not to give his name.  

Amro has reduced staff wages by 40 per cent at his Ramallah garage, which he said used to have 10 to 15 cars to service a day and now has one or two.

“If the situation continues this way we will not be able to pay the [remaining] 60 per cent [of wages],” he added. “Normally I have more than 100, 120, 150 workers in my projects. Nowadays I have less than 50. And I used, maybe one or two years ago, to have 200, 250 workers.” 

Abdul Karim, the economist, predicted that if the war continued the economic pain would worsen, leading to “a higher rate of poverty and that would put pressure on international humanitarian organisations” and the PA.

The hospitality sector is suffering, too. “Ramallah has always been very popular for its coffee shops, restaurants, fast food, fine dining, lounges, drinks, music,” said Mohammad Khalaf, operations director at the Royal Court Hotel.

“People staying up, at 12 o’clock at night going to restaurants . . . a party somewhere. Now all this is gone.”

Of the hotel’s 46 rooms, 42 are vacant. Because his few guests are often Palestinians marooned in Ramallah because of checkpoint closures, Khalaf has reduced room rates to half their pre-war level. Revenues at the hotel’s café are one-tenth of their normal rate.

While other hotels and restaurants have closed, the Royal Court decided to remain open so as not to lose staff, Khalaf said. But he had to slash their hours. Asked how long the hotel could keep going at a loss, he replied: “Not long.”