Palestine Economy Contracts 1% in Q2

Palestine's economy shrank 1.0% year-on-year in the second quarter of 2026, following a 4.8% contraction in the previous period. PCBS attributed the contraction to the repercussions of the Israeli aggression, while the West Bank economy contracted 4%. Most major activities recorded declines, led by agriculture, forestry and fishing (-15%), financial and insurance activities (-13%), construction (-6%), and mining, manufacturing, electricity and water (-3%). On the expenditure side, government spending dropped 7.8%, while household spending and gross fixed capital formation increased 7.0% and 1.3%, respectively. On the trade side, exports increased 18.2%, while imports rose 16.3%. On a quarterly basis, the economy expanded 1.9%, rebounding from an 8.1% contraction in the prior period.

Palestine's economy contracted 4.8% year-on-year in the first quarter of 2026, following a 3.0% expansion in the previous period. It marked the first annual contraction since Q3 2024, as final consumption fell 5.7%, reflecting declines in household spending (-2.1%), government consumption (-27.8%), and NPISH consumption (-13.0%). Gross capital formation also decreased 1.6%, with gross fixed capital formation slipping 1.3%. Meanwhile, exports increased 7.2%, driven by a 9.0% rise in goods exports despite a 17.2% decline in services exports, while imports rose just 1.3%, leading to a smaller net export deficit and making a positive contribution to GDP. On a quarterly basis, the economy contracted 8%, reflecting the continued impact of the Israeli aggression, while the West Bank economy also shrank by 8% over the period.

The economy of Palestine grew by 3% year-on-year in the fourth quarter of 2025, accelerating from a 1.4% growth in the previous period. The expansion was mainly driven by gains in services (11%), information and communication (12%), and industry (6%). In contrast, several sectors remained under pressure, including transportation and storage (-11%), construction (-10%), financial and insurance (-5%), and agriculture, forestry, and fishing (-4%). GDP for the quarter stood at USD 3,039 million in the West Bank and USD 176 million in the Gaza Strip. Meanwhile, GDP per capita rose by 1% year-on-year to USD 596. For the full year, the Palestinian economy remained in recession, contracting by 20% in 2025 compared to 2023, despite recording a 4% increase from 2024 levels.