Even before the latest crisis in the Gaza Strip, the tiny enclave's local economy was in a state of total collapse, chiefly due to the accumulated impact of a crushing seven-year blockade and two devastating Israeli military operations in November 2012 and December 2008, according to a new United Nations report out today.

The 2014 report on Assistance to the Palestinian People, compiled by the UN Conference on Trade and Development (UNCTAD), details how Palestinian economic deterioration, which is largely rooted in the territory's occupied status, has resulted in weak growth, a precarious fiscal position, forced dependence on the Israeli economy, mass unemployment, wider and deeper poverty, and greater food insecurity.

While the report's findings do not cover fallout from the current Gaza crisis, which has left more than 2,000 Palestinians dead, injured more than 10,000 and driven nearly 500,000 people from their homes, UNCTAD's Mahmoud Elkhafif said the situation today is emblematic of the ongoing erosion of Palestinian economic growth and development.

“All of this has created a kind of forced dependence of the Palestinian economy on Israel,” Mr. Elkhafif, Special Coordinator, Assistance to the Palestinian People, Division on Globalization and Development Strategies, said during a press conference in Geneva to launch the report. Since the Palestinian economy is no longer able to sustain itself, the only remaining option is for Palestinians living in the West Bank and the Gaza Strip to import products mainly from Israel.

After two years of 11 per cent growth – “don't be fooled, that's a big number but is not reflective of a healthy economy” – the Palestinian economy slowed to just 1.5 per cent growth in 2013, said Mr. Elkhafif.

“So the Palestinian economy is really shrinking…going back to basically no productive base,” he said, stressing UNCTAD's belief that this ongoing process of “de-development” or “reverse development” in the occupied Palestinian territory must end.

According to the report, it is crucial for the international community to base future recovery and reconstruction efforts on the fact that the devastation in Gaza is not just the result of the latest confrontation but is rooted in prolonged occupation, protracted conflict, a sustained, tightly maintained blockade and the recurrent destruction of Gaza's infrastructure, as has been documented annually in UNCTAD reports on the Palestinian economy since 1985.

A special section of UNCTAD's report focuses on the impact of the continuing occupation of “Area C” of the West Bank and asserts that lack of sovereignty over economic and natural resources deprives the Palestinian people of the opportunity to pursue and achieve sustainable economic development.

Area C encompasses 62 per cent of the West Bank, which is rich in natural resources but remains under full Israeli control. UNCTAD's report notes that Israeli control of Area C effectively prevents the Palestinian people from using their own natural resources and building on their own land. The Israeli Government has designated 39 per cent – more than twice the area under Palestinian control in Area A – for settlements and their future expansion, 20 per cent for closed Israeli military areas (including “firing zones”) and 13 per cent for natural reserves.

UNCTAD stresses that Area C is fundamental to the geographic contiguity of the West Bank and economic viability of the two-State solution and necessary for the development of public infrastructure and the needs of Palestinian communities, not only in Area C but in the whole West Bank.

UNCTAD concludes that reconstruction of the Palestinian economy in general and that of Gaza in particular requires not only substantial foreign aid but also renewed development efforts through investing in productive sectors and crucial infrastructure so that the productive base is rebuilt.

However, according to the report, any lasting recovery of the Palestinian economy will be impossible to attain without a sustained effort on the part of the international community to bring an end to the restrictions on movement in and access to the West Bank, alongside the complete lifting of the blockade, which has been smothering Gaza's local economy and isolating 1.8 million people from the outside world.

This could reverse the momentum of “de-development,” which has been reinforced by reoccurring military campaigns, UNCTAD says.