Palestine Economic Update
Palestine Economic Update - January 2026
author: Palestine Economic Policy Research Institute - MAS
year: 2026
Key Messages :
- Israel has continued to withhold the clearance revenues due to the PA for eight consecutive months now, forcing it to maintain partial salary payments while arrears and public debt continue to rise. External budget support remains insufficient to avert a deeper fiscal crisis, while the PA is exposed to additional pressure from Israeli lawsuits that could lead to further revenue deductions.
- In 2025, the Palestinian economy recorded around 4% GDP growth (driven by a fragile recovery in the West Bank alongside continued contraction in the Gaza Strip), yet output remained 24% below its 2023 level, reflecting severe economic losses and deep structural fragility. Forecasts for 2026 point to baseline growth of 4.1–4.5%, though outcomes remain highly contingent on political developments and the trajectory of reconstruction efforts.
- Against the backdrop of the surplus shekel crisis and looming correspondent-banking risks, the PMA intensifies high-level international engagement and proceeds with domestic reforms.
- In late 2025, the Ministry of Labour launched the AI-powered JobMatch platform to improve job matching and address skills mismatches. However, with unemployment reaching 78% in Gaza and 28% in the West Bank, meaningful labour market recovery remains contingent on easing Israeli restrictions, initiating reconstruction and creating viable alternatives to jobs lost in Israel.