The current conflict between Israel and Gaza, which has drawn international attention, has placed a substantial financial burden on Israel, with the Israel Central Bank revealing a staggering cost of 198 billion shekels (approximately $53 billion). This figure, encompassing more than half in defense spending, signifies the profound economic implications of the conflict on the nation.
As the temporary truce with Hamas enters its fifth day, the Bank of Israel has also adjusted its economic projections, now anticipating a growth rate of 2% in both 2023 and 2024, a decrease from previous forecasts. This revision indicates the conflict's far-reaching impact on Israel's overall economic health.
Bloomberg:
— Michael Weingardt (@Michael_Wgd) November 28, 2023
💢 According to the Bank of Israel, the cost of the conflicts in Gaza is 53 billion dollars. This figure is more than half of the country's annual defense expenditures.
💢 The Bank of Israel updated its growth target to 2%, which was 2.4% for 2023 and 2.8% for… pic.twitter.com/SzpkiGQQno
Economically, the war's toll on Israel is unprecedented. A report by global ratings agency Moody's last week, based on initial estimates from the Finance Ministry, suggested a daily cost of at least NIS 1 billion ($269 million). The report by Kathrin Muehlbronner, senior vice president at Moody's, underscored the potential for more severe economic damage than in past conflicts, dependent on the conflict's duration and the long-term domestic security outlook. It appears based on the Central Bank estimates that the Moody's estimates were significantly lower than the actual cost.
The total estimated cost of the war, as reported by the Institute for National Security Studies (INSS) and cited by Moody's, could reach up to 10 percent of Israel's gross domestic product. This financial strain far exceeds the costs of previous operations, such as Protective Edge in 2014 and the Second Lebanon War in 2006.
The government's expenditure during this period includes significant defense spending, compensation for businesses affected by the war, and the daunting task of rebuilding and rehabilitating communities devastated by the Hamas attacks. With fiscal revenues expected to decline due to reduced consumption and other economic factors, the financial impact of this conflict presents a formidable challenge for Israel's economy moving forward.
Israel keeps interest rates unchanged for 4th time
— INDEPENDENT PRESS (@IpIndependent) November 28, 2023
The Central Bank of Israel on Monday left its key interest rate unchanged for the fourth straight meeting despite the Gaza conflict's "significant economic consequences, both on real economic activity and on the financial… pic.twitter.com/7Veq7dMRoP
Meanwhile, the humanitarian situation in Gaza, as reported by a senior United Nations official, remains dire, with critical aid, including fuel, entering the region under the ceasefire agreement. The U.S. has emphasized the importance of avoiding further civilian displacement in any future offensives in southern Gaza, highlighting the already severe humanitarian crisis in the area.
In the Gaza Strip, over 1.7 million people have been displaced, and the Hamas led health ministry has reported a death toll surpassing 14,500 although these numbers cannot be verified and they do not distinguish between civilian, combatant or Hamas soldier. The Israel Defense Forces estimate that over 1,200 were killed in the initial Hamas attack on October 7, with ongoing hostage situations adding to the crisis. Israel is still counting the dead from that day, with many of the bodies being tossed into piles and burned. Israeli forensic specialists have been painstakingly testing everything to ensure all of the dead are accounted for.
The war cost Israel $53 billion.
— Sprinter Monitor (@SpriterMonitor1) November 28, 2023
The Central Bank of the Israel has outlined its most detailed assessment of the economic consequences of the war with Hamas. pic.twitter.com/4tRxCOPNtF
Amidst these developments, the U.S. is set to deliver humanitarian aid to Gaza, with the first flight scheduled to arrive in Egypt's northern Sinai. This U.S. government initiative will transfer aid to the United Nations for distribution in Gaza, marking a crucial step in addressing the humanitarian needs of the region.
