The report released on Tuesday by the UN Conference on Trade and Development points to the eight years of economic blockade of Gaza as well as the three wars between Israel and the Palestinians there over the past six years.
Last year`s war displaced half a million people and left parts of Gaza destroyed.
The war "has effectively eliminated what was left of the middle class, sending almost all of the population into destitution and dependence on international humanitarian aid," the new report says.
Gaza`s GDP dropped 15 per cent last year, and unemployment reached a record high of 44 per cent. Seventy-two per cent of households are food insecure.
The wars have shattered Gaza`s ability to export and produce for the domestic market and left no time for reconstruction, the report said. It noted that Gaza`s "de-development," or development in reverse, has been accelerated.
Israel and Egypt have maintained a blockade of Gaza since the Islamic militant group Hamas seized control of the territory in 2007.
The report comes as Egyptian military bulldozers press ahead with a project that effectively would fill Egypt`s border with the Gaza Strip with water and flood the last remaining cross-border underground smuggling tunnels, which have brought both commercial items and weapons into Gaza.
The report calls the economic prospects for 2015 for the Palestinian territories "bleak" because of the unstable political situation, reduced aid and the slow pace of reconstruction.
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