The Israeli military campaign in Gaza is having a severe impact on the Palestinian economy, according to the World Bank, which now estimates sharp economic contraction this year and next.

Israel’s fierce response to the Hamas surprise attacks on October 7, along with the shuttering of its borders to Palestinian workers from both Gaza and the West Bank, is likely to severely impact the Palestinian economy, according to the bank.

Despite Gaza’s small economic contribution, the World Bank now expects the overall Palestinian economy to contract by 3.7 per cent this year, down sharply from its pre-war forecast of a 3.2pc increase.

Next year, the situation is expected to be even worse.

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