Source: Al-Wafd newspaper
Dr. Ali Mohamed Al-Khouri
After the “Al-Aqsa Flood” operation carried out by the Palestinian factions on October 7, 2023, the Israeli aggression against the Gaza Strip witnessed a significant deterioration in the Israeli economy, as it suffered the largest losses in its history after the war continued for nearly 100 days. This decline is due to several factors, the most important of which are policies based on closure due to counterattacks launched by Palestinian factions, which targeted Israeli settlements in the Gaza Strip. Local economies were also affected by tax relief programs for store owners, and tourism, agriculture and production movement faltered due to call-ups of reserve forces. The Israeli Ministry of Finance expects a deficit in the state’s sovereign tax revenues of about 12 billion shekels by the end of this year, a change from the initial estimate of 10 billion shekels, but other and indirect losses may be more severe.
Statistics issued by the Central Bureau of Statistics in Tel Aviv show that more than 750,000 Israelis lost their jobs due to joining military service. This is a tangible loss to the Israeli economy, as they were an essential part of the workforce and active contributors to the national economy, constituting 18% of the total workforce in Israel. The Central Bank of Israel expects that the continuation of the conflict with Gaza until the end of this year (2024) will cause the economy’s growth rate to slow to 2% by the end of this year and 1% by the end of next year.
Expectations of the American bank JPMorgan Chase indicate that the Israeli economy will contract by 11%, on an annual basis, in the last quarter of 2023 due to the escalating conflict in Gaza. These estimates are considered among the most pessimistic expectations by Wall Street analysts so far, amid a heavy wave of selling of Israeli assets by investors, which led to a decline in the main stock index in Tel Aviv by 11% in local currency since the seventh of last October, and the shekel fell with it. to its lowest levels since 2012.
The most affected areas in Israel as a result of the attacks launched by Hezbollah and coming from inside Gaza on the heart of cities in Israel are the northern sector on the Lebanon front and the southern sector on the Gaza front, mainly in the areas whose residents have been evacuated, where a large part of the activity has been disrupted. Commercial activity in these areas, with tens of thousands of residents being evacuated to other cities inside Israel. This constituted a huge burden on the Israeli government, as a result of the damage to the productive and commercial sectors in all regions of the country, such as the fields of entertainment, restaurants, cafes, events, parties, civil aviation, tourism, and industry.
The World Bank has warned that the escalation of the war in Gaza may result in severe damage to the global economy, which is already suffering from a bad situation, and pointed to direct effects on basic commodities, especially oil and food.
The consequences of such wars will be harsh, will fuel a state of uncertainty in global financial markets, and will necessarily require renewing the peace process with the participation of major global actors, to calm the crisis and adhere to peaceful solutions and international legal standards. This must be paralleled by Arab solidarity to activate diplomatic channels to support reaching a permanent solution, work to rebuild the sector and save the economy of the region and the world from possible deterioration as a result of the extension of that conflict.