Produced jointly by the Palestinian economy ministry and the Applied Research Institute-Jerusalem think tank, the study said a slew of Israeli policies kept the Palestinians dependent on foreign aid by stifling economic growth.

It cited measures including Israel's blockade of the Hamas-ruled Gaza Strip, restrictions on water use and the lack of Palestinian access to natural resources, including the Dead Sea and quarries.

"The total costs imposed by the Israeli occupation on the Palestinian economy which we have been able to measure was $6.897 billion in 2010, a staggering 84.9 percent of the total estimated Palestinian GDP," the report said.

"In other words, had the Palestinians not been subject to the Israeli occupation, their economy would have been almost double in size."

The largest blow to the Palestinian economy comes from the blockade on Gaza, according to the study, which calculated the estimated cost of the policy by extrapolating Gaza's potential growth based on pre-blockade figures.

Before the blockade, first imposed in 2006, Gaza was on a similar growth trajectory to the West Bank, a track it veered from sharply after the imposition of the blockade and the subsequent 2008-2009 Israeli Operation Cast Lead war.

"Without such shocks, we would have expected the two economies to have continued to follow a similar pattern," the study said, calculating the lost revenue at $1.9 billion in 2010 prices -- more than a quarter of Palestinian GDP.

Lack of access to water resources accounted for the second largest loss of revenue, the study said.

Under the terms of the Oslo accords, the Palestinians were allocated around one quarter of the water resources available from three main West Bank aquifers, with the rest going to Israel.

But the study said restrictions mean the Palestinians are receiving even less than their allocation, while Israel takes more than it was given.

The imbalance has created water shortages in the West Bank, affecting agriculture and production, forcing the Palestinians to pay extra to import water from Israel, and in some cases leaving Palestinians without clean water, making them vulnerable to disease.

The cumulative effect is the loss of an estimated 1.9 billion dollars in 2010, the study said.

The report documented additional losses, including lost tax revenue, and the impact of Israel's ban on the import of "dual-use" items, including some chemical fertilisers, which hampers domestic production and pushes up costs.

Israel says the fertilisers can also be used to make explosives.

The study is the first attempt to quantify the total financial impact of Israel's occupation of the Palestinian territories, but it comes in the wake of several reports saying Israeli policy is holding back Palestinian development.

Earlier this month, the World Bank warned that for the Palestinians to sustain their state-building efforts "remaining Israeli restrictions must be lifted."