Palestine Economic Update
Palestine Economic Update - December 2025
author: Palestine Economic Policy Research Institute - MAS
year: 2025
Key Messages :
- With its trade tax withheld by Israel and domestic revenues contracting, the PA is sliding toward fiscal paralysis. Emergency measures adopted to manage the crisis, including spending cuts, partial and delayed salary payments, the accumulation of arrears, and an unprecedented public debt burden, are deepening the contraction in aggregate demand at a time when the economy urgently requires public expenditure stimulus.
- The fiscal crisis is driving disruptions in public services, the erosion of social protection amid rising poverty, and escalating spillovers to the private sector and the banking system.
- Israel extended the legal immunity enabling Israeli-Palestinian correspondent banking for only two months, temporarily easing politically driven uncertainty that poses major systemic risks to trade, liquidity, and financial stability.
- Israel reopened the King Hussein/Allenby/Karama Crossing to commercial cargo and humanitarian assistance after a three-month closure, restoring the only direct overland route through which goods enter the West Bank from/through Jordan without transiting Israeli ports. However, the crossing remains closed to exports.