GENEVA (Reuters) - Palestinian citizens are trapped in an economy of jobless growth with no prospects, especially in Gaza, which is undergoing “de-development”, the United Nations trade and development agency UNCTAD said in an annual report published on Wednesday.

A demonstrator waves a Palestinian flag in front of Israeli border police during a protest against Israeli land seizures for Jewish settlements, in the village of Ras Karkar, near Ramallah in the occupied West Bank September 4, 2018. REUTERS/Mohamad Torokman

It said unemployment in the Palestinian territories was the highest in the world in 2017, at 27.4 percent, while agricultural production fell by 11 percent. Half of Palestinians under 30 were unemployed. The economy grew 3.1 percent but was flat on a per capita basis.

“Every year the situation becomes more and more unacceptable and difficult,” UNCTAD Deputy Secretary-General Isabelle Durant told a news conference in Geneva, describing the economic situation as “absolutely unsustainable”.

A customs union between Israel and the Palestinian territories has isolated the Palestinian economy from the rest of the world and left it dependent on Israel, the report said.

“The major reason for this dark situation from the economic development point of view is a set of Israeli restrictions,” Mahmoud Elkhafif, coordinator of the report, said.

“These measures include permit systems for Palestinians to work in Israel, you have road blocks in the West Bank, you have earth mounds, trenches, road check points, gates and separation barriers.”

In Gaza, where real incomes have fallen 30 percent since 1999 and production capacity has been hit by successive military operations, households got an average of two hours of electricity daily, and only about 10 percent had drinking water.

“It is de-development, it is not development,” Elkhafif said.

Hamas, an Islamist movement designated a terrorist group by Western countries and Israel, seized control of the territory in 2007 following a brief civil war with forces loyal to Mahmoud Abbas, the Western-backed Palestinian president based in the West Bank.

Israel withdrew its troops and settlers from Gaza in 2005, but, citing security concerns, maintains tight control of its land and sea borders. Egypt also restricts movement in and out of Gaza on its border.

Abbas’s Palestinian Authority has also sought to use financial measures to isolate Hamas, last year slashing the salaries of thousands of government workers in Gaza by 30 percent.

Total international support dropped significantly, from $2 billion in 2008 to $720 million in 2017.

A further blow came this month when U.S. President Donald Trump halted funding for the U.N. Palestinian refugee agency UNRWA, leaving a $200 million gap.

Durant said it was too early to assess the impact of the U.S. move, and she hoped European or other donors might at least partially make up the shortfall.