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Development in Gaza and the Israeli-occupied West Bank could be set back decades according to a new UN report, which provides details of the economic devastation after a year of catastrophic war.
The UNDP report, released on Tuesday and titled Gaza War: Expected Socioeconomic Impacts On The State of Palestine, tracks indicators such as rising hunger and lack of shelter. While it has a strong focus on the Gaza Strip – where more than 42,000 people have been killed and nearly 100,000 wounded – it also tracks the wider impact on Palestinian territories as a whole.
It notes that the State of Palestine has lost $7.1 billion in real GDP due to the war, reiterating previous estimates of $18.5 billion in damage to Gaza.
Looking at the UN’s Human Development Index, the report says the key international indicator of poverty and progress could “regress by 69 years (to June 1955 levels)”, or the equivalent, since the indicator began in 1990.
About 140,000 homes have been damaged or destroyed, meaning that even if the war ends now, more than 740,000 people will be homeless, which carries its own risks, including the danger of disease in crowded displacement camps.
The Human Development Index was formulated by Pakistani economist Mahbub Ul Haq and measures factors such as schooling and the health of the population for a more granular understanding of poverty and development than GDP alone.
The report highlights how “93 per cent of children and 96 per cent of pregnant and breastfeeding women are consuming fewer food groups daily, leading to households skipping meals. As a result, the need for nutrition support is becoming more urgent”.
But the report also highlights disaster in the West Bank, where Israeli fire has killed nearly 800 people since October 7 – a colossal spike in violence amid regular Israeli raids into occupied towns such as Jenin and Nablus. Israeli checkpoints and the suspension of about 150,000 work permits for Palestinian workers to enter Israel have left the economy there in ruins, aggravating already high unemployment.
Israel has also stopped nearly $200 million per month being transferred to the Palestinian Authority, funds it collected on the PA's behalf from taxes and customs duties, known as “clearance revenue”.
“As of September 2024, approximately 3,300,000 Palestinians (2.3 million in Gaza), including 1,554,700 children, were in urgent need of various forms of humanitarian assistance,” the report warns. It says that in the West Bank and Gaza, poverty is expected to hit 74.3 per cent this year, affecting 4.1 million people.
Sharp decline
The report outlines three scenarios. In one, Israel does not lift restrictions on workers and clearance revenue, although current economic aid is maintained. A second scenario imagines restrictions continue but an additional $280 million in economic aid is allocated, and in a third scenario all restrictions are lifted and $570 million in aid is allocated, followed by $280 million a year.
Only in the third scenario does the report offer any hope of progress, albeit with steep unemployment.
The first scenario, with current aid levels but continued Israeli economic restrictions, predicts catastrophe. With the worker permit ban in place and revenue held back, “GDP is projected to fall by 20.1 per cent in 2025 and by 34 per cent by 2034 compared with prewar levels, with multidimensional poverty remaining extremely high.
“Achieving a permanent ceasefire is expected to decrease the already high unemployment rate by approximately 3 percentage points, allowing it to reach 55 per cent by 2034.”
By comparison, Tunisia has one of the worst unemployment rates in the Middle East, at 16 per cent.
In the second scenario, the restrictions continue but “$280 million in humanitarian aid addresses immediate needs”. But the report warns that this sum “does not support long-term economic recovery. Under this scenario, GDP is expected to decline by 19.6 per cent in 2025, with a 33 per cent drop by 2034. Poverty will persist, with only minimal improvements.”
Worryingly, even in the best scenario, with $280 million allocated for aid now and $290 million a year also allocated, plus all restrictions lifted, “productivity increases by 1 per cent annually” and unemployment stabilises at a staggering 26 per cent.
The report says any hope of recovery will need the restoration of “freedom of movement, establishing a political framework that promotes Palestinian ownership led by the PA, and providing minimum essential services such as water, electricity and telecommunications”.
It says a capacity-building effort – aid projects that build the skills of government workers to meet international standards – would be needed for Palestinian institutions “for recovery and reconstruction, reconnecting Gaza and the West Bank”.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
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PROFILE OF CURE.FIT
Started: July 2016
Founders: Mukesh Bansal and Ankit Nagori
Based: Bangalore, India
Sector: Health & wellness
Size: 500 employees
Investment: $250 million
Investors: Accel, Oaktree Capital (US); Chiratae Ventures, Epiq Capital, Innoven Capital, Kalaari Capital, Kotak Mahindra Bank, Piramal Group’s Anand Piramal, Pratithi Investment Trust, Ratan Tata (India); and Unilever Ventures (Unilever’s global venture capital arm)
New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
