The on going war in Gaza isn’t a joke for the Israeli economy as its losing $171 million everyday
As the war in Gaza continues for the 19th day, the scale of the war costs and the losses incurred by the Israeli economy in all its sectors have become clearer than before, as the Ministry of Finance and the Bank of Israel estimated that the value of these losses will amount to more than $18 billion, while the budget deficit is expected to exceed public $20 billion for 2024.
According to the statistics of the economic section of the Federation of Industrialists, the Israeli labor market suffers weekly losses worth 4.6 billion shekels ($1.2 billion) during the war, as a result of the lack of labor and the failure of workers and employees to go to the workplace due to the disruption of the education system, universities and colleges, and widespread mobilization for reserve forces.
It’s estimated that in the first two weeks of the war, about 1.3 million workers didn’t enter the labor market.
According to Alex Zabinski, chief economist at the investment Mitav firm, the war damages will reach more than 70 billion shekels ($18 billion), which constitutes about 3.5% of the gross domestic product of the Israeli economy.
As of the losses and damages, they are divided into 4 areas:
The direct cost of the ongoing war.
Compensation payments for property damage.
Financial assistance to families and businesses.
Loss of state revenues due to damage caused by the paralyzed economic activity.
Based on estimates by the investment Mitav firm, the war will last about 60 days and will be the most expensive of all the previous rounds.
Its direct cost will amount to about 25 billion shekels ($6.25 billion) in the form of the cost of weapons, ammunition, and reserve forces, and this is double the cost of the Lebanon war in 2006.
The cost of compensation for all victims and affected individuals and companies will reach 17 billion shekels ($4.25 billion), while the war will lead to a loss of tax revenues – with a decline in the gross domestic product – worth 31 billion shekels ($7.75 billion).
By the end of 2023, due to the war on Gaza, the state budget deficit will jump to 3% and even 4% of the gross domestic product, compared to pre-war deficit expectations of about 1.5%, according to estimates by Israeli Calcalist economics newspaper.
As a result of the expected increase in the budget deficit, the chief economist at the Mitav firm spoke about increasing the initiatives of the Israeli Ministry of Finance to recruit investments from Israeli and international financial funds, in order to finance the deficit, which may rise by the end of the year 2023 to reach 50 billion shekels ($12.5 billion).
According to economics experts in Israel, this deficit will appear in the general budget during 2024 as well, and expecting for economic growth to decline to 2.8% this year and 2% next year, while estimates at the Bank of Israel indicate that the ratio of public debt to GDP will rise at the end of 2024 to about 62%, compared to about 59% in 2023.
In order to cover the huge losses, it’s difficult to bring about an increase in taxes, due to the difficult situation of companies, families, and small and medium-sized businesses, while the Ministry of Finance is considering establishing a special fund outside the regular state budget.
As for the costs of the war so far, the initial economic plan will cost 4.5 billion shekels ($1.2 billion), but government officials estimate that the cost will at least double by the end of next November.
The cost of property damage is estimated at about 5 billion shekels ($1.4 billion), which will be paid from the property tax fund, which currently amounts to 18 billion shekels ($4.5 billion).
The cost of rebuilding 30 settlements near Gaza – which were damaged as a result of the October 7 Hamas attack, is estimated at more than 10 billion shekels ($2.5 billion), while the cost of a day of combat for the Israeli army is estimated at a quarter of a billion shekels ($62.5 million).
This means that in October alone, the war – 25 days – will cost more than 6 billion shekels ($1.5 billion).
