How Gaza went from desperately poor to even poorer – and why that’s important to the current war
The story we’re currently seeing unfolding in Israel and Gaza at present doesn’t seem to have much to do with economics. It’s about murders, terrorism and missile attacks.
But the economics lurks behind the scenes. It can’t explain all of what’s happening in the Middle East. It certainly can’t justify the horrendous attacks on Israel on 7 October – the worst massacre of Jewish people since the Holocaust.
Nor can it explain the intensity of the Israeli response, which has, according to Palestinian representatives, claimed more lives than were lost in the Hamas attack.
But, alongside religion, history, democracy – and the lack of it – economics is nonetheless an important part of the background story to the instability in this region.
Trustworthy data on the Palestinian Territories is hard to come by, but earlier today UNCTAD, the economic wing of the United Nations, published its annual stock-take of the Palestinian economy – perhaps the most reliable assessment of the situation on the ground. And that situation is stark.
It shows that as of last year, in other words before the recent attacks, the economy of Gaza was, by some measures, the most benighted in the world.
Gross domestic product per capita – the broadest measure of living standards – was a whopping 46% below its 1994 levels.
In other words, in the space of a generation, even as most other countries around the world saw their living standards rise sharply, Gaza’s people have become dramatically poorer.
What’s particularly striking when you look through the data is the divergence between Gaza and the West Bank, the other main part of the Palestinian Territories.
The two regions’ economies had roughly similar GDP per capita up until around 2007, when Hamas seized control of the Gaza Strip.
But look at what happened next. Economic growth in the West Bank meant that its economy is now considerably bigger and more prosperous than its 2007 levels.
The Gaza Strip, meanwhile, has seen its levels of prosperity crumple in a fashion rarely seen elsewhere in the world.
It’s a similar story if you look at unemployment rates in each of the regions: while they were relatively close up until 2007 (albeit that the Gaza jobless level was always a few percentage points above the West Bank level) in the post-Hamas period, the two lines have diverged dramatically.
The jobs market in the West Bank is (or was, as of 2022) tough. The jobs market in Gaza was hopeless.
Compare the Gaza Strip to other countries and you see just how much of an outlier it is.
While the unemployment rate in Israel is 3.5%, the comparable rate in the Palestinian Territories is 24% and the rate in the Gaza Strip is at 45%.
This is higher than any other country in the world – and note that the number is significantly higher for women and for young people.
There are plenty of explanations for this divergence. After Hamas took control of Gaza, Israel imposed a series of restrictions on the flow of people and trade in and out of the region.
The border is heavily policed. Entry and exit by air and sea is banned and there are only two crossing points towards the West Bank and East Jerusalem.
The majority of residents have been “locked in” for years, making it more like a prison than a fully functioning state.
Look at this chart of exports from Gaza and the West Bank and you get a sense of what this means in practice.
While the West Bank (and for that matter most other economies) have been able to grow their exports each year, as new businesses seek out opportunities to trade with Israel (the trade mostly goes to Israel), Gaza’s exports have essentially flatlined.
Of course, this does not cover the black market, but it’s the best picture we have available.
Israeli authorities say these restrictions are an essential part of policing Hamas and preventing terrorist activity. Trade is monitored and controlled to prevent weapons coming in and leaving.
That goes, too, even for items like fertiliser and steel tubes, since they could be used to make missiles. And they have more than half a point: Hamas social media accounts have gleefully boasted about how productive its home-made ammunition factories have been – despite these restrictions.
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Reality of Palestinians in Gaza City
These restrictions are not the only explanation for the collapse in Gaza’s economy: corruption is rife throughout the territory, with the upshot that much of what enters the country for the purpose of helping civilians is sometimes seized by Hamas leaders.
It is a sorry story, and the upshot is that Gaza has been a failing economy for many years, with levels of deprivation and poverty which have mounted to world-leading levels.
None of the above can explain, let alone justify, the attacks of October 7. In a parallel universe, Gaza could have been blessed with leadership which would turn the lines in the chart around – though that would also have been reliant on Israel lifting its various restrictions.
But numbers like these tend to make people feel desperate.
Gaza was already desperately poor before Hamas won its election and seized power. It has become significantly poorer, and significantly more desperate, in the years since.
In today’s Saudi Arabia, convention centres resemble palaces.
The King Abdul Aziz International Conference Centre was built in 1999 but inside it feels like Versailles.
Some might call it kitsch, but it’s a startling reflection of how far this country has come – the growth of a nation from desert bedouins to a vastly wealthy regional powerbroker in just one generation.
Trump latest: President signs huge arms deal with Saudi Arabia
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Trump signs deal with Saudi Arabia
At a bar overnight, over mocktails and a shisha, I listened to one young Saudi man tell me how his family had watched this transformation.
His father, now in his 60s, had lived the change – a child born in a desert tent, an upbringing in a dusty town, his 30s as a mujahideen fighting the Soviets in Afghanistan, his 40s in a deeply conservative Riyadh and now his 60s watching, wide-eyed, the change supercharged in recent years.
The last few years’ acceleration of change is best reflected in the social transformation. Women, unveiled, can now drive. Here, make no mistake, that’s a profound leap forward.
Through a ‘western’ lens, there’s a way to go – homosexuality is illegal here. That, and the murder of Saudi journalist Jamal Khashoggi, are no longer openly discussed here.
Bluntly, political and economic expedience have moved world leaders and business leaders beyond all that.
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Trump visit is ‘about opulence’
The guest list of delegates at the convention centre for the Saudi-US Investment Forum reads like a who’s who of America’s best business brains.
Signing a flurry of different deals worth about $600bn (£451bn) of inward investment from Saudi to the US – which actually only represent intentions or ‘memorandums of understanding’ at this stage – the White House said: “The deals… represent a new golden era of partnership between the United States and Saudi Arabia.
“From day one, President Trump‘s America First Trade and Investment Policy has put the American economy, the American worker, and our national security first.”
Pic: AP
That’s the answer when curious voters in faraway America wonder what this is all about.
With opulence and extravagance, this is about a two-way investment and opportunity.
There are defence deals – the largest defence sales agreement in history, at nearly $142bn (£106bn) – tech deals, and energy deals.
Underlying it all is the expectation of diplomatic cooperation, investment to further the geopolitical strategies for both countries on key global challenges.
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Trump says US will end sanctions on Syria
In the convention centre’s gold-clad corridors, outside the plenary hall, there are reminders of the history of this relationship.
There is a ‘gallery of memories’ – the American presidents with the Saudi kings – stretching back to the historic 1945 meeting between Franklin D Roosevelt and King Saud on board the USS Quincy. That laid the foundation for the relationship we now see.
Curiously, the only president missing is Barack Obama. Sources suggested to me that this was a ‘mistake’. A convenient one, maybe.
It’s no secret that the US-Saudi relationship was at its most strained during his presidency. Obama’s absence would give Trump a chuckle.
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From Monday: Why does Saudi Arabia love Trump?
Today, the relationship feels tighter than ever. There is a mutual respect between the president and Saudi Crown Prince Mohammed bin Salman – Trump chose Saudi Arabia as his first foreign trip in his last presidency, and he’s done so again.
But there are differences this time. Both men are more powerful, more self-assured, and of course the region has changed.
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There are huge challenges like Gaza, but the two men see big opportunities too. A deal with Iran, a new Syria, and Gulf countries that are global players.
It’s money, money, money here in Riyadh. Will that translate to a better, more prosperous and peaceful world? That’s the question.
World
Trump ‘thinking’ of going to Turkey for proposed Zelenskyy-Putin talks – as Russia silent on attending
Donald Trump has said he is “thinking” of going to Turkey on Thursday for potential peace talks between Ukraine and Russia’s leaders.
The US president, who previously claimed he could end the conflict in a day, has pushed for both sides to meet to bring the fighting to an end.
On Sunday, Ukraine’s Volodymyr Zelenskyy called out Vladimir Putin to meet him on Thursday in Istanbul, but the Kremlin leader has yet to respond.
Speaking late on Monday, Mr Trump said: “I was thinking about flying over. I don’t know where I am going be on Thursday.
“I’ve got so many meetings.
“There’s a possibility there I guess, if I think things can happen.”
Mr Trump has headed to the Middle East this week on the first major foreign trip of his second administration, visiting Saudi Arabia, Qatar and the UAE.
Mr Zelenskyy backed the prospect of Mr Trump attending the talks.
He said: “I supported President Trump with the idea of direct talks with Putin. I have openly expressed my readiness to meet.
“And of course, all of us in Ukraine would appreciate it if President Trump could be there with us at this meeting in Turkey.”
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Russia playing for time?
However, Kremlin spokesperson Dmitry Peskov, speaking on Monday, refused to say who, if anyone, would be travelling to Turkey from the Russian side.
“Overall, we’re determined to seriously look for ways to achieve a long-term peaceful settlement. That is all,” Mr Peskov said.
This came after the “coalition of the willing”, including Sir Keir Starmer, threatened Russia with fresh sanctions if it failed to comply with an unconditional 30-day ceasefire starting on Monday.
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Russia effectively rejected this proposal, instead calling for direct negotiations in Istanbul with Ukraine, at which Mr Zelenskyy challenged Mr Putin to make the trip himself.
Despite Russia’s claims towards wanting peace, Ukraine’s allies remained deeply sceptical about prospects for talks and whether Mr Putin was serious.
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European Union commission vice president Kaja Kallas said: “We want to see that Russia also wants peace.
“It takes two to want peace, it takes only one to want war, and we see that Russia clearly wants war.”
Meanwhile, Russia continued its nightly attacks on Ukraine.
Overnight into Tuesday, Ukraine said Moscow launched more than 100 drones.
It has been an extraordinary few hours which may well set the tone for a hugely consequential week ahead.
In the time that it took me to fly from London to Saudi Arabia, where President Donald Trump will begin a pivotal Middle East tour this week, a flurry of news has emerged on a range of key global challenges.
• On the Gaza war: The Trump administration has confirmed it’s holding talks with Hamas, which says it will release a hostage amid renewed hopes of a ceasefire.
• On the Ukraine war: President Volodymyr Zelenskyy has said he is prepared to meet Russian President Vladimir Putin in Istanbul – this announcement came minutes after Trump urged Zelenskyy to agree to the meeting.
• On the China-US trade war: The White House says the two countries have agreed to a “trade deal”. China said the talks, in Geneva, were “candid, in-depth and constructive”.
All three of these developments represent dramatic shifts in three separate challenges and hint at the remarkable influence the US president is having globally.
This sets the ground for what could be a truly consequential week for Trump’s presidency and his ability to effect change.
With his unique style, Trump is seeking to align numerous stars as he embarks on his first foreign diplomatic trip of his second presidency.
For days, it’s been unclear how the week ahead would unfold and which global challenge would be dominant.
The Saudi government has been instrumental as a broker in the Ukraine-Russia conflict and Qatar has been a mediator in the Gaza war.
Trump will visit both countries this week.
President Donald Trump on Air Force One earlier this month. File pic: AP
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Putin under pressure?
On Ukraine, Putin held a late-night news conference at the Kremlin on Saturday at which he made the surprise proposal of talks with Zelenskyy in Istanbul this Thursday.
But he rejected European and US calls for an immediate ceasefire.
The move was widely interpreted as a delay tactic.
Trump then issued a social media post urging Zelenskyy to accept the Russian proposal; effectively to call Putin’s bluff.
The American president wrote: “President Putin of Russia doesn’t want to have a Cease Fire Agreement with Ukraine, but rather wants to meet on Thursday, in Turkey, to negotiate a possible end to the BLOODBATH. Ukraine should agree to this, IMMEDIATELY. At least they will be able to determine whether or not a deal is possible, and if it is not, European leaders, and the U.S., will know where everything stands, and can proceed accordingly! I’m starting to doubt that Ukraine will make a deal with Putin, who’s too busy celebrating the Victory of World War ll, which could not have been won (not even close!) without the United States of America. HAVE THE MEETING, NOW!!!”
Within minutes, Zelenskyy responded, agreeing to the talks.
“We await a full and lasting ceasefire, starting from tomorrow, to provide the necessary basis for diplomacy. There is no point in prolonging the killings. And I will be waiting for Putin in Türkiye on Thursday. Personally. I hope that this time the Russians will not look for excuses,” Zelenskyy wrote on X.
The prospect of Putin and Zelenskyy together in Istanbul on Thursday is remarkable.
It raises the possibility that Trump would want to be there too.
President Volodymyr Zelenskyy welcomes other world leaders to Kyiv. Pic: Presidential Office of Ukraine/dpa/AP Images
Israel’s war in Gaza
On Gaza, it’s been announced that US envoy Steve Witkoff will arrive in Israel on Monday to finalise details for the release of Idan Alexander, an Israeli-American hostage being held by Hamas.
The development comes after it was confirmed that Mr Witkoff has been holding discussions with Israel, Qatar and Egypt and, through them, with Hamas.
The talks focused on a possible Gaza hostage deal and larger peace discussions for a ceasefire.
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Gaza after around a year and a half of Israeli attacks. Pic: Reuters/Mahmoud Issa
Just days ago, Israel announced a new military plan to move back into Gaza.
When do candid talks become a trade deal?
Meanwhile, officials from the United States and China have been holding talks in Geneva, Switzerland, to resolve their trade war, which was instigated by Trump’s tariffs against China.
Late on Sunday evening, the White House released a statement claiming that a trade deal had been struck.
In a written statement, titled “U.S. Announces China Trade Deal in Geneva”, treasury secretary Scott Bessent said: “I’m happy to report that we made substantial progress between the United States and China in the very important trade talks… We will be giving details tomorrow, but I can tell you that the talks were productive. We had the vice premier, two vice ministers, who were integrally involved, Ambassador Jamieson, and myself. And I spoke to President Trump, as did Ambassador Jamieson, last night, and he is fully informed of what is going on. So, there will be a complete briefing tomorrow morning.”
Beijing Global Times newspaper quoted the Chinese vice premier as saying that the talks were candid, in-depth and constructive.
However, the Chinese fell short of calling it a trade deal.
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A Qatari gift
In a separate development, US media reports say that Qatar is preparing to gift Trump a Boeing 747 from its royal fleet, which he would use as a replacement for the existing and aging Air Force One plane.
The Qatari government says no deal has been finalised, but the development is already causing controversy because of the optics of accepting gifts of this value.
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