Rana, mother of Iyad Halak, holds his photo at their home in East Jerusalem's Wadi Joz. AP

Iyad Halak.

A police spokesman had said officers killed a Palestinian they suspected was carrying a weapon in Jerusalem's Old City on Saturday, but according to Israeli media, the man was later found to have been unarmed.

Palestinian officials said the 32-year-old man, Iyad Halak, suffered mental health issues and decried his killing.

Halak's relatives said he had autism and was heading to a school for students with special needs where he studied each day when he was shot.

Rana, mother of Iyad Halak, cries as she shows his picture on her mobile telephone, at her home. Reuters

In comments at Israel's Sunday cabinet meeting, Defence Minister Benny Gantz said: "We are really sorry about the incident in which Iyad Halaq was shot to death and we share in the family's sorrow - but I am certain this matter will be investigated swiftly and conclusions will be drawn."

Benny Gantz, who is also Israel's "alternate” prime minister under a power-sharing deal, made the remarks at the weekly meeting of the Israeli Cabinet. He was sat near Prime Minister Benjamin Netanyahu, who made no mention of the incident in his opening remarks.

Meanwhile, the Palestinian economy could shrink by as much as 11% in the coming year as the coronavirus pandemic inflicts yet another blow to the Palestinian Authority's already shaky finances, the World Bank said on Monday.

The economic deterioration comes as tensions with Israel soar ahead of Israel's plans to annex large parts of the occupied West Bank, which would make it virtually impossible to create a viable Palestinian state.

Agencies