The Israeli economy loses $6.8 billion just in 4 days and companies are floundering from horror

Israel’s biggest banks, Hapoalim Bank estimated the cost of the initial losses incurred by the Israeli economy since the start of Hamas attack and the Israeli war on the Gaza Strip at about 27 billion shekels ($6.8 billion).

These estimates don’t include the costs of the loss of the Israeli shekel, the aviation sector, the cessation of businesses and factories, the loss of international companies’ confidence in working inside Israel, and the flight of investments.

These are costs that are difficult to calculate after Hamas attack, which shook Israel internally and raised a big question mark about its future.

The bank takes into account the large and widespread call-up of about 360,000 reserve soldiers who must leave their jobs and head to the battlefield, which is the largest mobilization since the 1973 war, when Israel called up about 400,000 reserve soldiers.

As a result of the current war against the Gaza Strip, Israel may bear heavy costs that will extend for years.

Hapoalim Bank says that so far it’s very difficult to know how the ongoing war will develop, and whether it will lead to a ground campaign to invade parts of Gaza that will take several weeks, or whether and how a campaign will also be launched in the north.

In this regard, the bank’s chief strategist, Moody Chevrier, said, “The reservists will be called to serve for a long time”.

He added, “At the present time, it can be assumed with a very rough estimate that the cost of the current war will amount to no less than 1.5% of GDP, which means an increase in the budget deficit of no less than 1.5% of GDP in the future”.

The bank’s expectations are based in part on the costs incurred by the occupying state during previous wars fought by Israel.

The costs of the 2006 Second Lebanon War, which lasted 34 days, were estimated at NIS 9.4 billion ($2.4 billion), or 1.3% of GDP, according to the Institute for National Security Studies (INSS).

The cost of Operation “Cast Lead” carried out by Israel against Hamas in Gaza in the period from December 2008 to January 2009 was estimated at approximately 3.3 billion shekels (about 835 million dollars).

Israel’s past wars, such as the Second Lebanon War in 2006, paralyzed part of the country due to the barrage of missiles that fell on Israel, but they didn’t last long to lead to the complete closure of the economy.

Previous experience shows that the impact of the war on GDP is expected to appear mainly in private consumption and tourism figures, but the very large mobilization of reserve forces and the estimate that the current war will continue for many weeks is expected to lead to more losses, according to the Israeli Bank.

The Israeli economy was already declining before the outbreak of war.

The Central Bank of Israel expected the economy to grow at a rate of 3% in both 2023 and 2024, after expanding by more than 6% last year.

The war waged by Israel on the Gaza Strip is killing companies, especially startups working in the technology sector, after the Israeli government agreed to call up 360,000 reserve soldiers, paralyzing companies operating outside the borders that have links to institutions within the country.

Businesses has stopped and meetings were canceled in various companies, as they faced a labor crisis.

Companies and investors with operations in Israel are evaluating how to proceed with work under these circumstances with no end in sight, especially since the recall operations in many companies affected most employees, including executive directors.

These developments weren’t limited to companies operating inside Israel, but rather to emerging companies that were established abroad in recent years, especially in the United States, where some Israeli founders run companies in advanced technology sectors.

For example, Itamar Friedman, co-founder and CEO of Israeli AI startup CodiumAI, told the Wall Street Journal that he joined the reserve service.

Relations between American and Israeli startups are strong, with American institutional investors pumping significant capital into Israeli startups, and a large group of Israeli founders running businesses in the United States.

Avi Eyal, co-founder and managing partner of Entrée Capital, estimates that most Israeli startups are seeing between 10% and 30% of their workforce mobilized in this war.

While Eric Reiner, founder and managing partner at New York-based Vine Ventures, said some companies are seeing half their employees mobilized.

This mobilization by the army will be acutely felt by early-stage startups, many of which are staffed by young leaders.

According to Roy Glasberg, founder and managing partner of Tel Aviv-based investment firm AnD Ventures, the crisis represents a new challenge for the Israeli startup market, which was already weakened by political divisions over recent judicial changes in Israel.

Therefore, the current war waged by the occupation army on the Gaza Strip isn’t like others in recent years, as it’s reshaping life and the economy in Israel amid heavy losses that began with the first day of Hamas attacks on Israeli military sites and settlements adjacent to the Gaza Strip.