Gaza Economy Hit Hard by Latest Fighting with Israel

Abdullah H. Erakat/The Media Line

The eight days of Israeli air strikes and Hamas rocket attacks have already taken a heavy economic toll on the Gaza Strip. Palestinian economists say the damage is already an estimated $100 to $150 million and the total could reach $500 million depending on the duration of the Israeli operation. “This recent Israeli war against Gaza came at a very bad time for the economy because this economy has been under siege,” Dr. Nasr Abdelkarim, a professor of economics at Bir Zeit University told The Media Line.

Aside from the almost 200 Palestinians who have been killed in the Israeli air strikes, hundreds of homes in Gaza have been destroyed and public properties, services and utilities, businesses and factories have been damaged. The Red Cross said that hundreds of thousands of Gazans have not had access to water for the past few days and fear a growing water crisis among Gaza’s 1.8 million people.

“Nothing in this world gives you the right to destroy a whole building if one of the people in that building is Hamas. Who gives them that right? Why are they destroying the Palestinian infrastructure in Gaza?” asks former Palestinian Minister of Industry and Trade Dr. Saadi El Krunz.

Even before the outbreak of the current fighting, the economy in Gaza was suffering. The Palestinian Central Bureau of Statistics said that unemployment had surged to 41 percent in the first quarter of 2014, the highest it has ever been. More than half of Palestinians suffer from food insecurity, meaning they do not know where their next meal is coming from. Gaza is also still recovering from previous conflicts with Israel.

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Abdulkarim says the estimated cost of the fighting in 2008, which lasted three weeks before a UN-brokered cease fire was imposed, was around $700 million. In 2012, the war lasted eight days and cost Gaza between $100 to 200 million.

“If it continues and if it extends to redeployment of Israeli forces, then definitely the cost will rise dramatically. We expect it will again reach up to $500 million dollars,” he told The Media Line.

El Krunz says that for a full economic recovery, Israel would have to ease restrictions and allow all goods into Gaza.

 “There’s no guarantee that if you do reconstruction and rebuild the infrastructure, the Israelis won’t destroy it again,” he told The Media Line. “No one can guarantee that even if the EU pays for any reconstruction in Gaza, Israel will not destroy it without thinking about the EU, international community or even America,” he told The Media Line.

“Economically, the timing of the war against Gaza came at very bad time because people were already living under stressful conditions,” said Abdelkarim. While most salaries have been paid in full since Palestinian unity was realized, 40,000 – 50,000 Hamas employees have not been paid for several months, which has added to the tension in Gaza.

“We are talking about disastrous living conditions before the war, now the war came and it will complicate the issues, keep the crisis, will make more households miserable,” said Abdelkraim.

According to statistics from the Ministry of Finance, international aid to Gaza has declined by 40% in the first half of the year after the Israeli-Palestinian peace process collapsed.

“In Europe, they give money to keep the peace building process going. If the peace process is on hold and facing a lot of obstacles, they probably reassess,” said Abdelkarim.

“If things are not going well (between Israelis and Palestinians), then they are going to cut or minimize the aid they are paying to us,” agrees El Krunz.

The EU contributed $21 million to the Palestinian Authority for the payment of June salaries and pensions for almost 70,000 Palestinian public servant workers in the West Bank and the Gaza Strip. Abdelkarim says in war, the need for aid is urgent and it’s up to the Palestinian leadership to appeal to the international community for aid.

On Sunday, Norway announced it would give $4 million dollars to Gaza. The United Arab Emirates has said that it will donate $52 million to Gazans, while Saudi Arabia has pledged a similar sum.

Unfortunately, the economist says Arab countries have not fulfilled their commitments,

“Some Arab countries have not paid one penny to Palestinians over the last couple of years or even more,” Abdelkarim said. He said it could be because of the internal situation in the Arab countries. But El Krunz disagrees saying the Palestinian’s relationship with the Arab states is not “at its best.”

Dr. El Krunz, who is also a professor of finance at Al Quds University, says he hopes that the Palestinians can take responsibility for their own economic future.

“Assume the ideal case, we have our own independent Palestinian state, we have our seaport, and we are in control of our borders,” he said. “Once we have our own international airport in West Bank and Gaza, things will be different. The Palestinians can depend on themselves and the Palestinian economy can move forward without any need for foreign aid.”