Israel's Economy: The High Price of Ongoing Conflict

Friday, 4 October 2024, 01:50

Israel's economy faces severe strain as the ongoing conflict escalates, resulting in significant economic costs and impacting growth projections. The finance minister acknowledges resilience yet warns of long-term damage. Projections indicate a potential contraction in GDP and mounting difficulties due to intense military expenditures.
Cnn
Israel's Economy: The High Price of Ongoing Conflict

Israel's Economic Challenges During the Conflict

As Israel's war widens, its economy is experiencing severe strain. Finance Minister Bezalel Smotrich acknowledged the situation on September 28, stating that Israel's economy 'bears the burden of the longest and most expensive war in the country’s history.'

Projected Economic Impact

Forecasts have drastically changed since the onset of the conflict. Initially projected to grow by 3.4% this year, the IMF now revises estimates to a mere 1% to 1.9%.

  • Deficit Increases: The war has doubled Israel's budget deficit to 8% of GDP.
  • Impact on GDP: The economy could contract by as much as 10% if escalations continue.

Long-Term Economic Damage

Economists warn of lasting economic repercussions. Flug's insights highlight concerns that military expenditure may lead to investment cuts, impairing future growth.

  1. Investor Confidence: Multiple downgrades from major credit rating agencies could raise borrowing costs.
  2. Business Closures: Estimates suggest that 60,000 Israeli firms may shut down this year.

While Smotrich expresses confidence in a bounce-back post-war, many doubt the resilience of the economy in the face of such uncertainty.


This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.


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