A Christmas tree was put up in Manger Square, Bethlehem. (ABC News: Hamish Harty)
For 98 years, the Tabash family have run a souvenir store in Bethlehem showcasing the handiwork of local artisans.
Rony Tabash is in charge now, the third generation to manage the business.
Since its opening in 1927, the last few years have been some of the family's toughest.
"Even my father, he always tells me 'Rony go open the shop,'" he said.
"It's not just for the business, it's for our hope — because we need this place, our history place, to be always open."
Rony Tabash's souvenir store showcases the handiwork of local artisans. (ABC News: Hamish Harty)
The war in Gaza has cast a long shadow across the West Bank, fuelling a severe economic downturn coupled with a crackdown on Palestinians by Israeli security forces.
The impact on daily life in places like Bethlehem has been extreme — felt most keenly around Christmas, when the Palestinian city is usually inundated with people keen to visit the place where the Christmas story was written.
"It was really very difficult, because not just my shop … 80 per cent of the population in Bethlehem, they depend on tourism and pilgrims," Mr Tabash said.
Shops have been closed in Bethlehem due to a severe economic downturn. (ABC News: Hamish Harty)
Christmas restarted
For the first time in two years, Bethlehem has restarted its Christmas festivities, with a hope that the worst is now behind the city.
On the first weekend in December dignitaries gathered for the official lighting of the huge Christmas tree in Manger Square, across the road from the Church of the Nativity, where Christians believe Jesus was born.
A tree was lit in Manger Square in front of the Church of the Nativity in Bethlehem. (ABC News: Hamish Harty)
Bethlehem's mayor, Maher Canawati, said it was as much a signal to the local community as it was to the world.
"This year, after two years of silence, we decided to reignite Christmas, to reignite the spirit that everybody needs here in town, in order to give them hope so they can continue staying in Bethlehem and not leaving Bethlehem," he said from his office, overlooking the square.
"And we have sent messages to the whole world that we are a people of peace, we love life, and we pray for a real and just solution so we can prosper."
Maher Canawati said lighting the tree was meant to give Palestinians hope. (ABC News: Hamish Harty)
Mr Canawati said the city had been struggling.
"We had a loss of approximately $US1.8 million ($2.72 million) a day in the industry of tourism," he said.
"The unemployment rate jumped from 14 to 65 per cent, poverty touched 60 per cent, [and] 4,000 people left [the city].
"It was really catastrophic what the people of Bethlehem went through — but we're hopeful, we're optimistic, and I think all of this will be reversed in God's name."
It is not all plain sailing, however.
A display of the nativity scene in front of the Church of Nativity. (ABC News: Hamish Harty)
Bethlehem walled-in
Restrictions on access to Bethlehem remain.
The city is on the other side of the wall Israel built cutting the West Bank off from Jerusalem in the name of security. The old city of Jerusalem is less than 10 kilometres away from Manger Square.
The most convenient checkpoints are often closed to all traffic, forcing people travelling to Bethlehem to take long and complicated detours to enter the city.
Bethlehem is blocked in by the Israeli separation wall. (ABC News: Hamish Harty)
"All of these hardships are unfortunately normal for the Palestinians — to be held at checkpoints for hours, to be humiliated by kids with guns, to be banned from going to your church, to be banned from going to your hospital, to your neighbour, to other cities in Palestine," Mr Canawati said.
"Our message to the whole world that these checkpoints have to be removed, this separation wall has to be demolished."
The mayor said people needed to see the "living stones" of Bethlehem, not just its ancient relics and buildings.
"I think Bethlehem is not owned by certain people, and I think Bethlehem is international and Bethlehem is the capital of the Christian world.
"So you if you're a Christian you have a piece of Bethlehem."
Palestinian children celebrate Christmas in Manger Square in Bethlehem. (ABC News: Hamish Harty)
But although Bethlehem is the Christian world's "capital", locals warn the local Christian population is getting smaller.
"The Christian figures are dwindling," said Samir Qumsieh, a Bethlehem historian who also directed a BBC miniseries about the story of Jesus called Nativity TV.
He said back in 1950, Christians made up 86 per cent of the population across Bethlehem, and two other West Bank cities called Beit Sahour and Beit Jala. Now, he said, the Christian population is less than 12 per cent.
"This is a real problem to us," he said.
Samir Qumsieh said the number of Christians in Bethlehem was decreasing. (ABC News: Hamish Harty)
'Year of good and blessing'
The Church of the Nativity at the centre of Bethlehem, one of the oldest Christian worship sites, is the focal point for Christmas celebrations.
Usually there would be long lines of pilgrims waiting to enter the grotto beneath it, which is the spot where Jesus is believed to have been born.
For the past few years, those crowds have been absent.
But this Christmas season, it is hoped the tide is turning, and the number of people visiting is slowly increasing.
Visitors to the Church of the Nativity have been largely absent. (ABC News: Hamish Harty)
Midnight mass numbers are still likely to be down on pre-war figures; Mr Qumsieh recalls visiting the mass in childhood, and not being able to walk due to crowds of thousands of people.
But in 2025, they are expected to be higher than recent years.
At Bethlehem culinary institution Afteem, which has been open since the late 1940's, the lunch time rush was on.
"The last two years have been, of course, difficult economically and the situation in general," Saliba Afteem Salameh said.
"We hope this year will be a year of good and blessing."
Saliba Afteem Salameh is hoping for a better year ahead. (ABC News: Hamish Harty)
On the other side of Manger Square, pride was etched across Mr Tabash's face as he showed the ABC the intricate wood carvings on display in his shop.
As a group of pilgrims wandered in, the salesman immediately began speaking Spanish, asking the group where they were from and thanking the priest who brought them by.
"We need the better future for the Holy Land and especially for Bethlehem,"Mr Tabash said.
Bethlehem city has put up a large Christmas tree in Manger Square. (ABC News: Hamish Harty)
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