The Israeli Treasury is acutely aware of the potential economic repercussions of the ongoing conflict, although estimating the exact costs and damages remains a formidable challenge. Contrary to characterizing it as merely another round of hostilities, a senior official from the Ministry of Finance emphasized the profound economic significance and extreme uncertainty of the current situation. Consequently, they have refrained from providing specific figures that would summarize the extent of the damage inflicted and anticipated.
The duration and intensity of this event remain uncertain, as does the government's policy regarding the education system. These factors have a profound impact on parents' ability to participate in the workforce, contributing to the economic complexities. While the Ministry of Finance has developed various internal scenarios for assessment, no concrete figures have been determined as of yet.
โI close my eyes and I donโt know where they are. They are either being raped in Gaza, or dead in a ditch somewhere.โ
โ Israel ืืฉืจืื ๐ฎ๐ฑ (@Israel) October 11, 2023
Listen to this father. pic.twitter.com/gFLW3L5ZjS
One undeniable consequence of this situation is the inevitable surge in the budget deficit. The critical question lies in how much it will increase and the means by which the government will finance it. Even before the conflict, in August, the deficit relative to the GDP had already risen to 1.3%, equivalent to 23.1 billion NIS โ surpassing early estimates.
Regarding financing the war effort, the Treasury has not yet revealed specific strategies. However, all options, including the possibility of implementing across-the-board cuts in government offices post-conflict, remain on the table. This approach is pragmatic, considering the difficulty of generating precise estimates in the midst of ongoing hostilities. Additionally, the anticipated aid from the United States constitutes a significant variable in this equation.
In the initial stages of the conflict, the Ministry of Finance referenced the economic impact of the Second Lebanon War to estimate potential costs to the economy. However, they soon recognized that the current event holds much greater economic significance. While the Second Lebanon War amounted to approximately 0.5% of the GDP, roughly 9-10 billion NIS in today's terms for the entire duration of the conflict, the ongoing situation is anticipated to exert a far more substantial economic toll.
Dear world๐ฐ๐๐
โ I ain nobody (@5thSuspendedAcc) October 11, 2023
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Today itโs #Israel ๐ฎ๐ฑ
But tomorrow it maybe you๐ฐ#IsraelPalestineConflict Victim Card #Gaza Quran #HamasTerrorism #Gaza_under_attack Pro Palestine #Israel #Hamas #HamasTerrorists #IStandWithIsrael pic.twitter.com/Dm98HRFmSS
A more comprehensive understanding of the economic implications will likely emerge when Dr. Shmuel Abramson, the Treasury's chief economist, releases an updated macroeconomic forecast, as mandated by law, by November 1. This forecast should provide critical insights into the economic landscape in the aftermath of the conflict. Meanwhile, intense airstrikes in Gaza and the potential of a Hezbollah attack coming from Israel's border with Lebanon remain the key focus of Israeli news.
