{"id":293987,"date":"2024-08-31T05:05:50","date_gmt":"2024-08-31T05:05:50","guid":{"rendered":"https:\/\/www.thetruthseeker.co.uk\/?p=293987"},"modified":"2024-09-01T08:08:18","modified_gmt":"2024-09-01T08:08:18","slug":"israels-economy-is-struggling-demonstrably-as-war-in-gaza-drags-on","status":"publish","type":"post","link":"https:\/\/www.thetruthseeker.co.uk\/?p=293987","title":{"rendered":"Israel\u2019s economy is struggling demonstrably as war in Gaza drags on"},"content":{"rendered":"

Associated Press \u2013 Aug 27, 2024<\/strong><\/h1>\n

In Jerusalem\u2019s Old City, nearly all souvenir shops are closed. In Haifa\u2019s flea market, forlorn merchants polish their wares on empty streets. Airlines are canceling flights, businesses are failing and luxury hotels are half empty.<\/p>\n

Nearly 11 months into the war with Hamas, Israel\u2019s economy is struggling as the country\u2019s leaders grind ahead with an offensive in Gaza that shows no signs of ending and threatens to escalate into a wider conflict.<\/p>\n

Prime Minister Benjamin Netanyahu has tried to allay concerns by saying the economic damage is only temporary. But the bloodiest, most destructive war ever between Israel and Hamas has hurt thousands of small businesses and compromised international trust in an economy once thought of as an entrepreneurial dynamo. Some leading economists say a cease-fire is the best way to stop the damage.<\/p>\n

\u201cThe economy right now is under huge uncertainty, and it\u2019s related to the security situation \u2014 how long the war will go on, what the intensity will be and the question of whether there will be further escalation,\u201d said Karnit Flug, Israel\u2019s former central bank chief who is now the vice president of research at the Israel Democracy Institute, a Jerusalem think tank.<\/p>\n

The war has inflicted a far heavier toll on Gaza\u2019s already broken economy, displacing 90% of the population and leaving the vast majority of the workforce unemployed. All banks in the territory have shut. The fighting has killed more than 40,000 people, according to Palestinian health officials in the Hamas-run territory. Their count does not distinguish between civilians and combatants.<\/p>\n

The fighting in Gaza and daily attacks from Hezbollah militants in Lebanon have also driven tens of thousands of people from their homes along Israel\u2019s northern and southern borders and caused large-scale damage.<\/p>\n

The Israeli economy has recovered from previous shocks, including shorter wars with Hamas. But this longer conflict has created a bigger strain, including the cost of rebuilding, compensating families of victims and reserve soldiers, and vast military spending.<\/p>\n

The drawn-out nature of the fighting and the threat of further escalation with Iran and its Lebanese proxy, Hezbollah, have an especially harsh impact on tourism. Though tourism is not a major driver of the economy, the damage has hurt thousands of workers and small businesses.<\/p>\n

\u201cThe hardest thing is that we don\u2019t know when the war will end,\u201d said Israeli tour guide Daniel Jacob, whose family is living off savings. \u201cWe need to finish the war before this year\u2019s end. If it\u2019s another half a year, I don\u2019t know how long we\u2019re going to make it.\u201d<\/p>\n

Jacob, 45, returned in April from six months of duty as a reserve soldier to find out that business had dried up. He was forced to shutter the tourism company he spent two decades developing. His only income is aid from the government, which pays him half his prewar salary every few months.<\/p>\n

Meir Sabag, a Haifa antiques dealer whose shop sat empty, said business is worse now than during the COVID-19 pandemic.<\/p>\n

On a recent weekday, the formerly bustling port of Haifa, a major hub of Israeli import-export where massive container ships would often stop, was still.<\/p>\n

With Yemen\u2019s Houthi rebel group endangering ships passing through Egypt\u2019s Suez Canal, many long-haul ships have stopped using Israeli ports as hubs, said a port official who spoke on the condition of anonymity because he was sharing internal information.<\/p>\n

He said Israeli ports saw a 16% percent drop in shipping in the first half of the year, compared with the same period in 2023.<\/p>\n

The war began on Oct. 7, when Hamas militants killed some 1,200 people and took 250 people hostage<\/a>.<\/p>\n

Renewed U.S.-led cease-fire efforts appear to be sputtering, and Iran and Hezbollah have threatened to avenge the recent assassinations of top militant leaders, raising the threat of a wider regional war. These fears have prompted major airlines, including Delta, United and Lufthansa, to suspend flights in and out of Israel.<\/p>\n

Yacov Sheinin, an Israeli economist with decades of experience advising Israeli premiers and government ministries, said the total cost of the war could amount to $120 billion, or 20% of the country\u2019s gross domestic product, a broad measure of economic activity.<\/p>\n

Of all 38 member countries in the Organization for Economic Cooperation and Development, Israel\u2019s economy underwent the biggest slowdown from April to June, the organization reported Thursday. The Israeli GDP was projected to grow 3% in 2024. The Bank of Israel now predicts a growth rate of 1.5% \u2014 and that\u2019s if the war ends this year.<\/p>\n

Fitch downgraded Israel\u2019s rating from A-plus to A earlier this month, following similar downgrades by S&P and Moody\u2019s. The downgrading could raise the government\u2019s borrowing costs.<\/p>\n

\u201cIn our view, the conflict in Gaza could last well into 2025,\u201d Fitch warned in its rating note, which cited the possibility of \u201csignificant additional military spending, destruction of infrastructure and more sustained damage to economic activity and investment.\u201d<\/p>\n

In another worrying sign, the Finance Ministry this month said the country\u2019s deficit over the last 12 months has risen to over 8% of GDP, far exceeding the 6.6% deficit-to-GDP ratio the ministry projected for 2024. In 2023, Israel \u2018s budget deficit was roughly 4% of its GDP.<\/p>\n

The downgrade and the deficit have increased pressure on the Israeli government to end the war and reduce the deficit \u2014 something that would require unpopular decisions such as raising taxes or cutting spending.<\/p>\n

But Netanyahu needs to keep his coalition afloat, and his hardline finance minister, Bezalel Smotrich, wants the war to continue until Hamas is decimated.<\/p>\n

Flug, the former central-bank chief, said the situation is unsustainable and that the coalition will have to cut back on spending, such as unpopular subsidies to ultra-Orthodox schools that are perceived by the broader public as wasteful.<\/p>\n

\u201cThe public will have hard time accepting it if the government does not show that the severity of the situation forces them to give up some of the things that are dear to them,\u201d Flug said.<\/p>\n

Smotrich said Israel\u2019s economy \u201cis strong\u201d and vowed to pass a \u201cresponsible budget that will continue to support all the needs of the war, while maintaining fiscal frameworks and promoting growth engines.\u201d<\/p>\n

The unemployment rate has dipped below prewar levels, Sheinin said, to 3.4% in July compared with 3.6% in July of last year. But when taking into account Israelis forced out of the labor market, the figure rises to 4.8%, a figure that would still be considered low in most countries.<\/p>\n

Meanwhile, many small businesses have closed because their owners and employees were called up for reserve military duty. Others are struggling amid the broader slowdown.<\/p>\n

Israeli business information company CofaceBDI reports that some 46,000 businesses have closed since the start of the war \u2014 75% of them small businesses.<\/p>\n

Even Jerusalem\u2019s iconic American Colony hotel, a popular stop for politicians, diplomats and movie stars, has laid off workers and is mulling pay cuts, said Jeremy Berkovitz, who represents the owners.<\/p>\n

\u201cWe did consider at one point closing for a few months,\u201d said Berkovitz \u201cbut of course that would mean sacking all the staff. It would have meant letting the gardens, which we\u2019ve developed over 120 years, go fallow.\u201d<\/p>\n

Sheinin said the best way to help the economy bounce back would be to end the war.<\/p>\n

\u201cBut,\u201d he cautioned. \u201cIf we are stubborn and continue this war, we will not recover.<\/p>\n

Source <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The war in Gaza is not only taking a heavy toll on Palestinian civilians and the IDF, Israel\u2019s economy is also paying a heavy price. Since Oct 7, 2023, nearly 46,000 Israeli businesses have been forced to close<\/p>\n","protected":false},"author":39262,"featured_media":293988,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[118,66,37],"tags":[],"class_list":["post-293987","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-7-10-gaza-war","category-Economics","category-Israel_Anti-Semitism_Zionism_and_US-UK_allies"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/293987","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/users\/39262"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=293987"}],"version-history":[{"count":1,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/293987\/revisions"}],"predecessor-version":[{"id":293989,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/293987\/revisions\/293989"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/media\/293988"}],"wp:attachment":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=293987"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=293987"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=293987"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}