The blockade of Gaza was imposed after Hamas took over in 2007 and Israel declared that it was now a “hostile territory”. With the support of Egypt, Israel sealed Gaza by land, sea and air, devastating its economy, driving unemployment to record levels and leaving the population dependent on aid to survive.
Though it may seem impossibly distant now, life before 2007 was very different, even though Israeli forces were still occupying Gaza. “A lot of people talk about those times as better: there was more money, and a better economy,” Zayne Abudaka said. According to UN Trade and Development, real GDP per capita in Gaza dropped by more than 27% between 2006 and 2022.
Here’s how that happened – and how it shaped the current catastrophe.
What was Gaza like before the blockade?
Before the signing of the Oslo Accords in 1993, a Palestinian in Gaza could get in a car and drive to Haifa in Israel without checkpoints or permits. “Obviously there were no civil rights, there was a lot of oppression, because you had an entire national identity without self-determination,” Abudaka said. “But in terms of freedom of mobility, access to resources, and opening a business, it was pretty straightforward.”
Before the formation of the Palestinian Authority (PA), the economy relied heavily on productive industries like farming, although farmers were, and still are, regularly harassed by Israelis, Abudaka said. Then the PA created a huge raft of public sector jobs. “So all the people whose kids were going to become farmers, they started telling the children, ‘why go through this headache? Why don’t you work for the PA?’”
The influx of aid, which increased rapidly until 2013, further empowered the PA to absorb workers from different sectors. “The things that the Oslo accords had introduced, including the division of the different areas, lack of access to borders and to energy generation created a situation whereby the only jobs that were increasing were public sector and international NGO jobs,” Abduka said. “And all the productive jobs like industry and agriculture started dying down.” He points to a stark statistic: in 1996, more than 20% of the Palestinian territories’ GDP came from industry. Today, it hovers around 10%.
When the second intifada erupted in 2000, the deaths of thousands of Palestinians and Israelis were accompanied by an intensifying Israeli occupation and the destruction of key infrastructure. “We lost 30 to 40% of our GDP in a single year,” Abudaka said. “Cities were under siege, curfews were imposed, you couldn’t leave your house. It was a dramatic escalation in violence. People were left feeling desperate.”
What has been the impact of the siege?
After Israel imposed its blockade, trade and investment collapsed. “Unfortunately the PA did not direct its finances to investing in the economic productive base,” Abudaka said. “So you have a lack of investment, less jobs, and end up in a situation where two-thirds of young people are unemployed.”
The siege imposed restrictions on a list of items that it was claimed that Hamas could use to make weapons and rockets – many of which were essentials for civilian life. It included wedding dresses, baby bottles and nappies, and water and sewage pumps.
Agriculture also suffered from the territory’s extreme density. Gaza spans just 360 sq km, and its population grew significantly before the war. As a result, traditional farmland quickly became overbuilt. “In the north of Gaza, there was an area called Sheikh Ijlin, which was known for really good grapes. The area has 300,000 people living in one sq km. If you had walked in that area, you would have seen buildings and grapes side by side.”
How did Gaza try to adapt?
Gaza’s local authorities set out new rules to manage the siege economy. “You would go on the ministry website and see how many dunams, a unit of area, of every single plant they had. So they managed to say, ‘We need this many tomatoes, so we’ll do that’,” Abudaka said.
In some ways, Gaza’s strangled economy had the potential to function better than the more prosperous West Bank’s. “The West Bank is not one continuous area,” Abudaka said. “The PA controls these tiny islands that are surrounded by settlements. Although Gaza was seized, it was one area. So the people living there had control over their resources, which meant that they had services that worked. They had agriculture production despite everything.”
But these adapted resources were battered by the wars that followed in 2008, 2012, 2014, 2021, and 2023. After each war came promises of reconstruction, but only a fraction of the aid money that was pledged ever materialised, Abudaka said.
Israel wanted reassurances that aid that went in couldn’t fund Hamas’s military activity, Abudaka said. “This led to the creation of the Gaza Reconstruction Mechanism, which is a security arrangement where Israeli security checks the goods that enter. It didn’t stop Hamas from building tunnels. It did annihilate Gaza’s economy.”
What does the future hold for those living there?
What is now unfolding in Gaza is a process of “de-development,” Abudaka said. In 2006, about 63% of Palestinians in Gaza relied on aid. Today, almost all of Gaza’s 2.3 million inhabitants depend on humanitarian assistance.
A smaller, yet still damaging version of this is playing out in the occupied West Bank. Abudaka pointed to the banking system as one example. “Because we don’t have our own currency, we use four, including the Israeli shekel. But we can’t deposit physical shekels with the Israeli central bank unless we prove where they came from. So Palestinian banks end up holding piles of cash they can’t use. That limits lending, which hurts growth,” he said.
Another issue is clearance revenues. “Because we don’t have a customs authority at the border, the Israeli authorities will collect that tax in our place. And then they’ll send us the money back, but we have to show them receipts, which is often impossible because we don’t control the borders. Then we go to the Israelis and say, ‘You owe us 100m.’ And they say, ‘No … we’re keeping the other 50m because you didn’t provide all the receipts. On top of that, the Israelis take 3% as a fee.”
Now far-right finance minister Bezalel Smotrich is trying to stop the money altogether. “But this isn’t the whole story … He wants the PA to be simply a military force that looks Palestinian, but is actually Israeli. A force that controls Palestinians, but doesn’t provide them with services.”
This crushing Israeli control over every facet of ordinary life, Abudaka said, is forcing young Palestinians to confront a difficult question. “You do see a lot of Palestinian young people who are saying, listen, I love my country. I just don’t have a future,” he says. “We have really been steadfast, but this can’t go on.”
