The World Bank has warned of a looming cycle of poverty in Gaza, in which child malnutrition, psychological trauma and institutional collapse could entrench deprivation across generations.

The economist issuing the warning, speaking in an internal briefing that has been seen by multiple international analysts, observed that Gaza's humanitarian emergency is evolving into structural impoverishment - a process that cannot be reversed simply by aid injections. He pointed to escalating child stunting, widespread food insecurity and a mental-health burden that will suppress human capital for years to come.

Gaza's poverty rate has surged to nearly 100 per cent as households exhaust coping mechanisms. According to World Bank estimates drawn from its“Impacts of the Conflict in the Middle East” report, nearly all families in Gaza now live below the poverty line, up from about 29 per cent across the Palestinian territories in 2023. In parallel, real GDP per capita in Gaza is not projected to recover to pre-war levels until 2038 under current assumptions.
The destruction wrought on infrastructure, commerce and public services totals about US$30 billion in direct damages, with additional economic losses of nearly US$19 billion from foregone output and underutilised capacity. Reconstruction needs in Gaza and the West Bank are estimated at US$53 billion, including rebuilding housing, utilities, schools and health facilities.

The Bank's briefing underscores several channels through which poverty may transmit across generations. First, malnutrition in early childhood - already rising sharply - will lead to cognitive deficits, lower school performance and reduced lifetime earnings. Second, psychosocial trauma and mental-health conditions, intensified by persistent conflict, will degrade the capacity of youth to engage productively or innovate. Third, institutions central to recovery - such as education, healthcare and local governance - are already fragmented or non-functional in many areas.

In Gaza, food insecurity has escalated to crisis levels: 100 per cent of the population is experiencing acute food insecurity, while 32 per cent face catastrophic conditions, with famine declared in parts of the territory. Across the Palestinian territories, poverty has risen to nearly 40 per cent, and social safety nets have been strained to breaking point. The World Food Programme in June 2025 extended food aid to just 5,500 Gaza households and 210,000 beneficiaries in the West Bank.
This scale of deprivation, combined with limitations on movement, trade and industrial activity, limits the effectiveness of traditional aid. While international donors remain indispensable, the economist emphasised that relief alone cannot break the poverty cycle.

A second strand of risk lies in fiscal collapse and institutional weakening. The Palestinian Authority already operates under severe constraints. Clearance revenues collected by Israel but withheld or deducted in part have squeezed the PA's budget, forcing salary cuts and accumulation of arrears. The PA's deficit in 2024 reached US$1.3 billion, about 9.5 per cent of GDP, financed through bank borrowing and delays to private sector payments. Without reform or external support, widening fiscal gaps threaten basic service delivery and may further cripple governance.

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