In the West Bank, the report documents reduced access to land and natural resources associated with settlement expansion. It also reports rising displacement: 38 communities have been emptied of Palestinian since 2023, and displacement in the first quarter of 2026 exceeded the total recorded in 2025.
Fiscal pressures threaten macroeconomic stability
The report finds that the Palestinian Government’s fiscal position has deteriorated sharply. Under the Paris Protocol, Israel collects more than two-thirds of Palestinian fiscal revenue on behalf of the Palestinian Government. Transfers have been intermittent and subject to deductions. According to the report, clearance revenue transfers due to the Palestinian Government were fully withheld from May 2025 through mid-2026.
Cumulative deductions and withheld revenues between January 2019 and March 2026 exceeded an estimated $3.67 billion at the exchange rates prevailing when the payments were due – equivalent to 83% of total Palestinian net revenue in 2025. The report estimates the 2025 budget deficit at 13% of GDP when unpaid clearance revenues are excluded, compared with 6% when those revenues are counted as revenue due to the Government.
These fiscal pressures are constraining essential services. Health-related arrears reached $1.1 billion by late 2025, raising risks to the continuity of services provided by hospitals, non-governmental providers and pharmaceutical suppliers. In the West Bank, resource shortages led schools to limit in-person instruction to three days a week in 2025, according to the report.
Risks to the banking sector
To finance the deficit, the Government has increasingly borrowed from domestic banks and accumulated arrears to private sector suppliers and the pension fund, bringing total public debt to $4.8 billion in 2025.
Combined with lending secured against government salaries, exposure of the banking system to the public sector has reached $5.3 billion, or 42% of all bank lending.
According to the report, the short validity of letters of indemnity issued by Israeli authorities affects correspondent banking relationships and access to global trade and finance. Palestinian banks also face constraints in converting physical shekel banknotes into digital balances because of restrictions on currency repatriation. Together, these constraints could disrupt financing for imports of fuel, medicines and food.
Economic crisis in Gaza
The report estimates that 92% of Gaza’s economic establishments have been damaged or destroyed since October 2023. GDP per capita stood at $212 in 2025 – equivalent to about $0.58 per person per day in GDP terms and 17% of its 2022 level. Unemployment reached 78%, while more than 90% of the working-age population was not employed.
Gaza’s share of Palestinian GDP fell from 17.4% before October 2023 to less than 4% in 2025.
All productive sectors in Gaza remained far below their 2022 output levels: agriculture and industry were each down 94%, while construction was down 99%, the report finds.
