At a time when Israel has waged its third war in two years, an analysis has found that the country’s economy will shrink by 5% from wars in the coming time.
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Israel’s economy is set to shrink up to 5 per cent as a result of wars in the Gaza Strip and Iran, according to an analysis.
Israel has been continuously at war since the Hamas-led attack on October 7, 2023. As Israel went on a war with Hamas, hundreds of thousands of reservists were pulled from their day jobs to serve in the military that led to the disruption of the economy.
Months later, Israel expanded the war in Gaza against Hamas to Lebanon against Hezbollah. Earlier this month, Israel went on war against Israel with a bombing campaign that sought to neutralise the country’s nuclear and ballistic missiles programme.
While the campaign against Hamas, Hezbollah, and Iran have brought significant gains to Israel, if not outright victories, the costs have been enormous. Large swathes of the country have suffered damage from missiles and rockets. As hundreds of thousands were people were pulled into military services and several establishments remained closed for long durations because of safety concerns, economic growth saw a steep decline that is set to last for years to come.
Israeli economy to fall 5%
Israel’s economy is set to be 5 per cent smaller than before the ongoing wars began, according to Liam Peach, a Senior Emerging Markets Economist at Capital Economics. He credited the decline to drop in labour from reservists being pulled into military service and lack of Gazans workers after the Oct. 7 attack.
“Israel’s economy is going to be about 5 per cent smaller over the next few years than if the war hadn’t happened. That is quite a big impact. Although Israel has been resilient, and some parts of the economy have bounced back, there has been this quite big supply-side impact that is taking a long-lasting toll on the economy,” Peach told The Daily Telegraph.
Israeli economic growth fell from 6.5 per cent in 2022 to just 2 per cent in 2023 and mere 0.7 per cent in 2024. If this was not damning enough, business investment fell 67.8 per cent.
On the other hand, defence spending increased by over 60 per cent and deficit rose above 6 per cent from pre-war surplus of 0.6 per cent.
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