In a period during which Israel has engaged in its third conflict within two years, an analysis has determined that the nation’s economy is projected to contract by 5% due to the impacts of these wars in the near future.
Israel’s economy is projected to contract by up to 5 percent due to the ongoing conflicts in the Gaza Strip and Iran, as indicated by an analysis.
Since the Hamas-led assault on October 7, 2023, Israel has been in a continuous state of war. The military engagement with Hamas necessitated the mobilization of hundreds of thousands of reservists from their civilian occupations, resulting in significant economic disruption.
Months later, Israel broadened its military operations in Gaza against Hamas to include actions in Lebanon against Hezbollah. Earlier this month, Israel initiated a bombing campaign aimed at neutralizing the nation’s nuclear and ballistic missile programs.
While the military efforts against Hamas, Hezbollah, and Iran have yielded considerable gains for Israel, if not outright victories, the associated costs have been substantial. Extensive areas of the country have sustained damage from missile and rocket attacks. With hundreds of thousands of individuals conscripted into military service and numerous businesses remaining closed for extended periods due to safety concerns, economic growth has experienced a sharp decline that is expected to persist for years.
Israeli economy to decline by 5%
According to Liam Peach, a Senior Emerging Markets Economist at Capital Economics, Israel’s economy is anticipated to be 5 percent smaller than it was prior to the onset of the current wars. He attributed this decline to the reduction in labor availability due to reservists being called into military service and the absence of Gazan workers following the October 7 attack.
“Israel’s economy is projected to be approximately 5 percent smaller over the next few years than it would have been had the war not occurred. This represents a significant impact. Although Israel has demonstrated resilience, and certain sectors of the economy have rebounded, there has been a considerable supply-side effect that is inflicting a long-term burden on the economy,” Peach stated in an interview with The Daily Telegraph.
Israeli economic growth plummeted from 6.5 percent in 2022 to merely 2 percent in 2023, and is expected to drop to just 0.7 percent in 2024. To compound the situation, business investment has decreased by 67.8 percent.
Conversely, defense expenditures surged by more than 60 percent, while the deficit escalated to over 6 percent from a pre-war surplus of 0.6 percent.
