Strengthening Private Sector Resilience in the Gaza Strip: An Integrated Framework for Economic Recovery and Sustainable Development - Round Table (9)

The October 2023 war has devastated the productive base of Gaza's private sector, leaving 88% to 92% of economic establishments fully or partially destroyed. Recovery needs in the productive sectors alone are estimated at about US$20 billion. Yet the policy problem lies not only in the scale of destruction but also in the prevailing reconstruction approaches that focus on rebuilding physical assets, assuming economic recovery will follow automatically. The return of goods’ flow does not mean the economy is operating again, nor does rebuilding an establishment mean restoring its capacity to produce. The problem shows up in four interlinked distortions:

• A survival economy instead of a productive economy: Imports are concentrated in consumer goods while the entry of productive inputs remains limited, and more than 80% of traders operate in the informal sector.
• Operational bottlenecks that disable remaining capacity: The cost of commercial electricity has risen from about NIS 0.6 to about NIS 35 per kilowatt-hour, and inputs, spare parts, and working capital are in short supply. Employment in the garment factories covered by the study fell from about 9,000 workers to about 300, while some 100 poultry farms could cover nearly 40% of pre-war demand within weeks if inputs were available.
•  Gaza's disconnection from the Palestinian economy: Any establishment that restores production will have limited impact if it remains cut off from suppliers, financial services, and markets in the West Bank and abroad.
• A gap in finance and financial intermediation: Establishments have lost their collateral and cash flows, and banking intermediation in Gaza has broken down despite the soundness of the Palestinian banking system as a whole, while recovery financing remains fragmented and reliant on grants. The longer the disruption in activities, the more skills, trade relationships, and working capital erode, and the more establishments that could have recovered turn into ones requiring costlier reconstruction.