Palestinian economy relies heavily on donations and international aid from various sources, including UNRWA, Qatar, Turkey, the European Union, and non-governmental organizations.

Palestine hosts numerous international non-governmental organizations (NGOs) and humanitarian agencies, which contribute to the local economy and provide employment.

Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36.1% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth.

The downturn in economic activity was due to Israeli closure policies in response to terrorist attacks in Israel, which disrupted previously established labor and commodity market relationships.

[33] However, by the end of World War II, Palestine had experienced a significant level of prosperity and was considered one of the most advanced countries in the Middle East in terms of economic development.

[33] The disruption of supplies from other parts of the Mediterranean due to the war, especially the actions of the Germans, created a higher demand for Palestinian citrus products.

[33] During the war, Palestine experienced a period of economic prosperity, which coincided with new forms of investment and trade that connected the region and its entrepreneurs to the global market.

[34] The Oslo Accords, signed in the 1990s, led to the establishment of the Palestinian Authority (PA) and limited self-governance in parts of the West Bank and Gaza.

[36][37] In 2005, the PNA Ministry of Finance cited the Israeli West Bank barrier, whose construction began in the second half of 2002, as one reason for the depressed Palestinian economic activity.

Tension between Hamas and Fatah rose as a result of this "economic squeeze" on the PA.[44] In 2009, the Israeli military removed its checkpoint at the entrance of Jenin in a series of reductions in security measures.

[45] In September 2012, EU activists stated that the Palestinian economy "lost access to 40% of the West Bank, 82% of its groundwater and more than two-thirds of its grazing land" due to the occupation and settlement construction.

[67] Foreign tourism is presently restricted to East Jerusalem and the West Bank, following the August 2013 indefinite closing of the Rafah crossing located between Egypt and the Hamas controlled Gaza Strip.

The presence of oil and gas reserves in Palestine has become a contentious issue, with some advocates suggesting that these fossil fuel resources are influencing Israel's attacks on the region.

[71] The Israeli government is also interested in building a pipeline to export gas to European nations, particularly as Europe seeks alternative energy providers due to the ongoing conflict between Russia and Ukraine.

[71] The struggle between Israelis and Palestinians dates back to colonial times, with tensions and conflicts fueled by the desire for community, safety, and control of the land.

[71] The international community's complicity in the ongoing Israeli occupation and the conflict in Gaza is seen by some as intricately tied to capitalist interests and the pursuit of profit.

[71] Overall, the conflict in Palestine and the pursuit of oil and gas resources have deep historical and geopolitical roots that contribute to the ongoing tensions in the region.

[74] Block-1 field, which spans an area of 432 square kilometres (167 sq mi) from northwest Ramallah to Qalqilya in Palestine, has significant potential for recoverable hydrocarbon resources.

[74][76][77] Currently, an initial pre-exploration work program is underway to prepare for designing an exploration plan for approval, which will precede the full-fledged development of the field.

[88] In August 2009, a state of the art web-based system for tracking goods coming in and out of the area by Palestinian customs was launched in partnership with the United Nations Conference on Trade and Development.

[90][91] In 2010, Ramallah was described as a hub of the economic activity thanks to improved security within the city, successful battle against corruption and large consumer base.

However, since the advent of Israeli security checkpoints and the separation barrier starting over a decade ago, it has become isolated from its customer base leading to serious economic decline.

[94] According to CIA's The World Factbook, Israel's closure policy, which was extended when the Hamas administration came to power in 2007, was responsible for high levels of poverty and unemployment and a significant decline of the private sector which was heavily reliant upon export markets.

Yet, there have been incidents where Israeli employers did not fulfill their legal obligations to the employees by refusing to provide a paycheck or hide the number of work hours to avoid labour laws such as minimum wage or social security benefits.

The PA has passed labour laws but do not enforce rules such as the minimum wage, annual vacations, sick leave or extra payments for overtime work.

The Palestinian Authority responded by indicating that it would not trade its political aspirations for economic aid, but was assured that the plan was meant as a complement to negotiations, and not as a substitute.

[48][127] Due to the clearance crisis with Israel, the Palestinian economy was severely hit in terms of public finances, according to the World Bank's report in 2019.

The report states, "Against a background of declining aid flows, the recent standoff stemmed from Israel’s unilateral deduction of US$138 million from the PA’s clearance revenues in 2019 to offset estimated payouts to Palestinian martyrs and prisoners' families.

"[128] In 2006, the unity of the Palestinian economy was fractured following Fatah-Hamas split prompting Israel to sever direct ties between the West Bank and Gaza.

[129] The import and export prosperity in Palestine was impacted by the border restrictions and constant Israeli control in the West Bank and Gaza, which also weakened the industrial and agricultural sectors.