Israel's economy, Wartime

Summary: Israel's Economy Faces Severe Threat as Gaza War Continues

Israel’s economy is under severe strain as the ongoing conflict with Hamas extends into its 11th month. The protracted fighting has led to a halt in tourism, closure of small businesses, disruptions in shipping, and an increased national deficit. Key areas such as Jerusalem’s Old City and Haifa’s flea market are experiencing significant downturns, with many businesses failing and luxury hotels running at half capacity.

The streets of Jerusalem on Yom Kippur, archive (Photo: Flash90)

Prime Minister Benjamin Netanyahu has attempted to downplay the economic impact, but experts warn that a ceasefire is essential to prevent further damage. The war has also severely impacted Gaza, displacing 90% of its population and leaving many unemployed. The conflict's toll includes over 40,000 deaths in Gaza, and Israel reports significant losses among Hamas fighters and terrorists.

Economic strain includes high costs for rebuilding, compensating victims, and military expenditures. Tourism, although not a major economic driver, has been especially hit hard. Shipping through Israeli ports has decreased by 16%, and major airlines have suspended flights to Israel.

Economists estimate the war could cost up to $120 billion, affecting Israel’s GDP growth, which is now forecasted to be just 1.5% in 2024. Credit rating agencies have downgraded Israel’s rating, increasing borrowing costs. The national deficit has surged to over 8% of GDP, pressing the government to consider unpopular economic measures.

Despite a drop in the unemployment rate, many small businesses have closed or are struggling. Ending the war is seen as crucial for economic recovery.

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