Unable to import raw materials or export finished goods because of the near embargo, many factories are having to lay off workers and may shut down entirely if they cannot relocate.
Muhammad al-Susi, owner of one of the largest furniture factories in Gaza, has already rented a site in Egypt and is in the process of moving operations across the southern border.
He says Israel's frequent closure of the Karni crossing (al-Mintar), the main commercial trading point with Gaza, is to blame.
"We depend on exporting our products to Israel and the West Bank but for four months now we haven't been able to make one shipment out.
"That has meant huge losses. We haven't been able to fulfil deals we made and we don't see any indication that things are going to get better any time soon."
Karni, through which virtually all commercial supplies enter and leave Gaza, has been closed on a regular basis since Hamas won Palestinian elections in January.
As of May 2 the crossing was shut for 57 days of this year, or 47% of the time, according to the United Nations. By comparison, Karni was closed 18% of 2005.
Israel says it closes the border for security reasons.
Khalid Abd al-Shafi, an economist, says Gaza's economic situation is the worst in 40 years and says unemployment now exceeds 50%. He also estimates that up to 80% of the 1.4 million population is living below the poverty line.
"If local investors are running away from Gaza, international investors will not even think about it"
Khalid Abd al-Shafi, economist
The international boycott against the Hamas-led government has left the Palestinian Authority unable to pay its 165,000 employees throughout the West Bank and Gaza Strip since March. Many civil servants have given up small luxuries, such as cigarettes and haircuts, to scrape by.
Hairdressers in Hebron delivered some relief on Monday, offering free haircuts to any government worker.
Abd al-Qadr Qaud, an employee at the Transport Ministry who got his hair cut, said he had mixed feelings.
"I'm happy they're cutting my hair for free, but I'm embarrassed I can't pay them. I have never been in this position where I had to ask for help before."
In September last year there was some optimism when Israel completed a pull out after 38 years of occupation in Gaza. Then, many hoped an independent Gaza would see foreign investment and business boom and poverty decline.
Abd al-Shafi says Gaza businessmen are also thinking about relocating to Sudan.
"If local investors are running away from Gaza, international investors will not even think about it," he said.