The confrontation between Israel and Hamas has brought both military and political consequences and economic repercussions. Hapoalim Bank’s initial projections stipulate significant figures that will affect various sectors of the Israeli economy.
Economic estimates of the war
The cost of the war between Israel and the Hamas terrorist group is currently estimated at NIS 27 billion ( $ 6.8 billion ). This figure considers the call-up of 300,000 reservists, this being the largest mobilization since the Yom Kippur War in 1973. In addition, it includes the rehabilitation of infrastructure and care for families of deceased soldiers.
Hapoalim Bank Chief Strategist Modi Shafrir commented on the uncertainty of future events and their economic implications. Furthermore, it is estimated that the cost of the war could increase the country’s budget deficit by at least 1.5% of GDP in the following year.
Compared to previous conflicts, the Second Lebanon War in 2006 cost NIS 9.4 billion ( $ 2.4 billion ), while Operation Cast Lead in 2008-2009 was estimated at NIS 3.3 billion ( $ 835 million ).
Short and long-term economic repercussions
Past wars, such as that of 2006, had a crippling impact on certain areas of the country, but the economy quickly recovered following the conflict’s conclusion. However, Shafrir indicates that the current mobilization and projected duration of the conflict could have a more direct and lasting effect on the Israeli economy.
Since the start of the conflict, there has been a drop in local stocks and bonds, and many educational institutions and businesses have closed their doors. In addition, airlines have suspended most flights to Tel Aviv. The Israeli central bank has announced a sale of up to $ 30 billion in foreign currency to stabilize the shekel, although the local currency has recently fallen more than 2%.
The global panorama and war
The International Monetary Fund (IMF) warned that the conflict could influence the global economy by affecting oil prices. Global economic growth is expected to slow to 2.9% in 2024. Pierre-Olivier Gourinchas, the chief economist of the IMF, indicated that it is premature to determine the exact impact of the conflict on the global economy. Still, an increase of 4% has already been recorded % in oil prices.
Israeli economy: trends and projections
Prior to the conflict, Israel’s economy projected 3% growth for 2023 and 2024. However, various factors such as leftist violence over judicial review, high-interest rates and inflation, along with the global context, have influenced the country’s economic slowdown.
In August, the country’s budget deficit reached 1.3% of GDP, equivalent to NIS 23.1 billion ($6 billion ). With public spending increasing due to the conflict, more financing is likely to be needed, which could lead to tax increases and thus further pressure the economy.