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The main challenges are the Occupation, sanctions, lack of electricity, and lack of medical care and production.

Specifically, Gazans do not have a strong urban infrastructure that can support the current population leading to high levels of malnutrition and overcrowding. There is minimal industry and internal production, both because of a genuine lack of raw materials and because those few raw materials that do come in are usually allocated to the Anti-Israel fighting. Gaza has a blockade both on land and at sea from both Israel and Egypt which prevents large-scale trade and development. Additionally, the Hamas government rules as a repressive quasi-fascist state, allowing human rights abuses against religious minorities (mostly Christians, but some Shiite Muslims -- there are no Jews in Gaza), holding curfews, and often using thugs to patrol the streets and kill dissidents.

Of course, these are the problems that persist during "peacetime" when Israel and Hamas or Egypt and Hamas are not actively engaged in warfare. When warfare occurs, these problems are exacerbated, especially since there is minimal space for Palestinians to flee from Israeli aerial bombardment and most of Gaza's food, water, and electricity are provided by Israel, which leads to a conflict of interest during the fight.

Answer:

I'd like to point out that the "Occupation" mentioned above is actually perpetrated by Hamas itself. Gaza is not occupied by Egypt or Israel, both of which operate in Gaza only on a response-to-threats basis.

People don't seem to realize just how much the Gazans are suffering at the hands of Hamas. For example, Israel built a field-hospital for wounded Gazans , and Hamas shelled it with rockets. Hamas has fired upon the power station that supplies Gaza with electricity. Hamas engages in human-rights abuses not only against women, and against Israeli citizens in Israel and Christians in Gaza, but against the entire civilian population of Gaza. In firing thousands of rockets against Israeli civilians, and in placing missile-launchers in schools, homes and hospitals, Hamas has brought unnecessary collateral damage on Gaza. The cowardly Hamas uses women and children to protect its weapons by putting them as a human shield near its weapons caches and rocket launchers. Also, in recent years they have not built so much as a single bomb shelter in Gaza, shelters that could save the lives of many civilians. Instead, they have used resources to build dozens of underground tunnels from which to attack Israel and try to destroy it.

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