Israeli economy shrinks due to war outbreak
Israel’s Economy Plunges Amidst War with Hamas
The Israeli economy has been hit hard following the start of the war with Hamas, resulting in the country’s first economic downturn in two years. According to the Central Bureau of Statistics, Israel’s gross domestic product plummeted by a staggering 19.4% in the fourth quarter, compared to a 1.8% growth in the previous quarter.
Economists from Goldman Sachs Group Inc., Tadas Gedminas and Kevin Daly, emphasized the significant impact of the conflict on Israel’s economy. The surprise attack by Hamas on October 7th caused immense damage, with 1,200 civilian casualties and approximately 250 abductions.
The ongoing conflict, as Israel continues its invasion of Gaza to dismantle Hamas, is projected to cost the country 255 billion Israeli shekels, equivalent to $70.3 billion, by the end of 2025. This amounts to a staggering 13% of Israel’s GDP.
Consumer Confidence Plummets, Reservists Called Up
The Oct. 7 attack had a severe impact on consumer confidence and household spending, resulting in a drastic 26.9% decline in private consumption. Additionally, the call-up of reservists for the war effort has further contributed to the economic downturn, with approximately 8% of the workforce being withdrawn.
Furthermore, the market has been rocked by restrictions similar to those experienced during pandemic-era lockdowns.
Investment and Exports Take a Hit
Businesses have experienced a significant drop in fixed investment, with a staggering 68% decrease. This is primarily due to a halt in residential building and a reduction in Palestinian workers. Exports have also suffered, falling by over 18%.
Despite these challenges, Israel’s GDP managed to expand by 2% for the full year, aligning with projections from the central bank. The central bank anticipates a further 2% expansion in 2024.
For more information, click here to read more from The Washington Examiner.
What are the main sectors of Israel’s economy that have been adversely affected by the ongoing conflict with Hamas?
Adversely affected by the ongoing conflict with Hamas, leading to a substantial plunge. This article aims to shed light on the current situation and its potential consequences for Israel’s economy.
The conflict between Israel and Hamas has been ongoing for years, characterized by intermittent clashes and ceasefires. However, the recent escalation in violence has had a more significant impact on Israel’s economy, resulting in a sharp decline in various sectors.
One of the direct consequences is a decline in tourism, which has traditionally been a significant contributor to Israel’s GDP. The continuous rocket attacks and the resulting instability have deterred tourists from visiting the country. Many countries have issued travel warnings, urging their citizens to avoid or reconsider travel to Israel. As a result, hotels, restaurants, and tourist attractions are facing a significant decrease in business, causing a considerable blow to the tourism industry.
Furthermore, the manufacturing and export sectors have also been adversely affected. With the ongoing conflict, many factories and production facilities have been forced to halt operations temporarily or indefinitely due to safety concerns. Moreover, transportation disruptions, including closed borders and damaged road infrastructure, have hindered the distribution of goods both domestically and internationally. These disruptions have led to a significant decline in exports, placing a strain on Israel’s economy, which heavily relies on trade.
Additionally, the ongoing conflict has negatively impacted investments in Israel. Uncertainty and the perceived risk associated with the conflict have made foreign investors wary, leading to a decrease in foreign direct investment (FDI). This decline in investment not only affects the economic growth of the country but also slows down innovation and technological advancements that typically accompany foreign investments.
Furthermore, the financial sector has not been immune to the consequences of the conflict. The Tel Aviv Stock Exchange, Israel’s main stock exchange, has witnessed a significant downturn. The uncertainty and market volatility resulting from the conflict have led to a decrease in investor confidence, resulting in a sell-off of stocks and a general downturn in the market. This situation has negative implications for both local businesses and investors, as stock prices plummet and portfolios face losses.
In response to the economic challenges faced during the conflict, the Israeli government has implemented measures to mitigate the impact. These include financial support for affected businesses, waivers for taxes and fees, as well as providing assistance to affected workers. However, these measures can only provide temporary relief and may not fully address the structural hardships faced by the economy.
It is essential to recognize that the impact of the conflict on the Israeli economy goes beyond immediate financial figures. The ongoing instability and violence hinder long-term development, leading to social and economic repercussions that will take time to recover from. The loss of lives and destruction of infrastructure further exacerbate the challenges faced by the country.
As the conflict continues, it is crucial for both sides to prioritize a peaceful resolution, as this will provide a foundation for stability and economic recovery. International efforts should be intensified to mediate and facilitate dialogue between Israel and Hamas, leading to a lasting ceasefire. A peaceful resolution will be the key to rebuilding the economy and allowing businesses, tourism, and investments to thrive once again.
In conclusion, the ongoing conflict with Hamas has caused a significant decline in Israel’s economy, impacting various sectors like tourism, manufacturing, exports, and investments. The consequences go beyond immediate financial losses, affecting the country’s long-term development. Efforts to achieve a peaceful resolution are crucial to ensure stability and promote economic recovery.
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