Israel's Economy Shrinks 20% Amid Hamas Conflict

Israel economy

As the war against Hamas continued, Israel’s economy shrank by 20 percent. This is the first time in the history that the economy of the country has recorded such a decline. This was due to the fact that the war brought businesses to a standstill, people were displaced and more people were called up as reservists. According to data released on February 20, the country’s gross domestic product registered a quarterly decline for the first time in two years. Looking at figures for the last three months of 2023, annual GDP fell by 19.4 percent. That was worse than the figures in an earlier survey by Bloomberg analysts. They had predicted a 10.5 percent decline.

The Israeli currency fell 0.4 percent after the figures came out. Meanwhile, the Tel Aviv stock market posted a 35-point gain. After the start of the war, the economy slumped at the end of last year, but when the figures for the whole of last year are examined, the GDP has increased by two percent. This is similar to the forecast by the central bank’s research arm. The bank has predicted that the economy will grow by around two percent in 2024 as well. Meanwhile, the growth rate estimated by the Ministry of Finance is 1.6 percent.

Israel started the war against Palestine after the attack of Hamas on October 7. Before the war, Israel’s economy was worth $520 billion. This is the first official data on the economy since the start of the war. As the government called up large numbers of young men as reservists to participate in the war, it saw an eight percent drop in the total labor force. Restrictions similar to the lockdown imposed during the spread of Covid-19 came into force in the country. This led to a sudden collapse in the production sector and a surge in consumption. In addition, schools, offices and construction sites were also closed.

The aftermath of the war hit Palestine the hardest. This has led to a serious humanitarian crisis in Gaza. The International Monetary Fund (IMF) stated that Palestine had almost completely collapsed in the fourth quarter of last year. Cumulative GDP in Gaza and the West Bank fell by six percent in 2023.

On October 7, 1200 people were killed in Israel following a surprise attack by Hamas in Israel. About 250 people were taken hostage by Hamas. Figures from the health sector show that 29,000 people have been killed in Gaza in the war waged by Israel in retaliation. Israel has made it clear that the attack will continue until the hostages held by Hamas are released.

At the same time, the intervention of the Israeli authorities has almost halted the decline of the market. The central bank said it would sell $30 billion of its reserves to support the local currency.

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