Gaza Strip Economy on ‘Verge of Collapse,’ World Bank Says

RAMALLAH, West Bank — Gaza’s war-battered economy is on the “verge of collapse,” dragged down by soaring unemployment rates that followed last summer’s war with Israel, border restrictions and government dysfunction, the World Bank says in a new report.

Infighting between Gaza’s Islamist Hamas rulers and the Western-backed Palestinian president, Mahmoud Abbas, the report said, is delaying reconstruction of the tiny territory, which suffered widespread damage during the war.

The report, issued late Thursday, said Gaza’s unemployment rate now stood at 44 percent, 11 points higher than before the war — and the world’s highest level. The youth unemployment rate, at 60 percent, is the highest in the Middle East, the report noted.

The report said that 40 percent of Gaza’s nearly 1.8 million Palestinians lived in poverty, even though around 80 percent received some sort of aid.

“These numbers, however, fail to portray the degree of suffering of Gaza’s citizens,” the report said, citing frequent power failures, limited access to clean water, “war-related psychological trauma” and limited movement because of the difficulty of importing materials for rebuilding.

Israel argues it needs strict mechanisms to monitor reconstruction materials entering Gaza because Hamas has diverted them in the past to build tunnels for cross-border attacks. Egypt, too, has cracked down on the once-thriving tunnel trade with Gaza, with security officials there saying militants used the tunnels to gain access to its territory.

The Israeli and Egyptian policies have intensified restrictions that were imposed in 2007, after Hamas seized the territory, and that block a wide array of imports and exports and prevent residents from leaving, except under exceptional circumstances.

The World Bank said the restrictions had to be eased to allow construction materials “to enter in sufficient quantities” and to allow exports. It also called on donors to pay their pledges. Less than a third of the $3.5 billion in aid pledged by international donors has been delivered so far, it said.

“The economy cannot survive without being connected to the outside world,” the report quoted Steen Lau Jorgensen, the World Bank country director for the West Bank and Gaza, as saying.

The World Bank said the tightened restrictions meant the construction sector’s output was reduced by 83 percent, while the manufacturing sector as a whole shrunk by 60 percent.

Sameer Abumdallala, an economics lecturer in Gaza’s Al-Azhar University, who did not participate in writing the World Bank report, estimated that 30,000 men were sitting idle because of the lack of construction activity.

Adding to Gaza’s woes, most of Hamas’s civil servants, some 40,000 people, have not been paid in months because of a funding shortfall, Mr. Abumdallala said. He estimated that another 15,000 men were unemployed because of Egypt’s blocking of the smuggling tunnels that once provided an economic lifeline.

Mr. Abumdallala said he did not expect a collapse in Gaza but “an explosion.”

“It will be in the face of Israel, Egypt, and even against Hamas,” he said.