The Israeli Economy and the War on Gaza

bank of israel
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Despite the significant economic impact, it has become increasingly clear that Israel’s military objectives are unlikely to be deterred in the short term. اضافة اعلان

Israel's genocidal war on the Gaza Strip, exceeding 100 days, has resulted in the death, loss, and injury of at least 100 thousand Palestinians, constituting about four percent of Gaza's population. The majority of the strip’s infrastructure and most buildings and homes have been destroyed, and these actions are currently under review by the International Court of Justice (ICJ) in The Hague.

On the economic front, Israel's Gross Domestic Product (GDP), approximately $500 billion annually, has experienced a noticeable decline. Some Israeli economic research centers estimate this to be around 2 percent in the last quarter of 2023. Additionally, the productivity and efficiency of the Israeli workforce have negatively been impacted by the war conditions.

This has increased pressure on the labor market, with nearly 200 thousand claims for unemployment compensation filed, further exacerbated by the mobilization of reserve soldiers and the prevention of Palestinian workers from working within the Green Line-Palestine occupied in 1948.

Furthermore, Israel's economic challenges are compounded by inflationary pressures, especially with the devaluation of the Israeli Shekel against major currencies like the US dollar. The ongoing war on Gaza has severely impacted the tourism sector and related economic activities, among other sectors.

These challenges have been echoed in warnings from credit rating agencies, such as Moody's, Standard & Poor's, and Fitch, raising concerns about Israel's investment appeal, particularly in its ability to attract foreign investment, which may negatively affect its short and medium-term competitive advantages.

However, the approach of Israeli leaders towards the war is shaped by their perception of the state's strategic threats. The acts of resistance on October 7, 2023 were seen as a significant blow to Israel's deterrence capability and international standing. Israeli decision-makers thus see the continuation of the war to achieve its goals, or some of them, as a strategic necessity.

To mitigate the economic impacts and substantial costs of the war, Israel heavily relies on financial aid from allies such as the US, the UK, Germany, and France. These countries view the survival of Israel as a strategic priority, and aid is expected to increase as the aggression on the strip continues.

While Israeli politicians believe that the direct war losses, estimated at about $250 million daily, and the resulting significant government budget deficit can be compensated through allied aid, the repair of structural damage to the economy will be more challenging. The disrupted sectors will require considerable time and resources to recover, posing long-term challenges to the Israeli economy.

In conclusion, while the economic costs and losses sustained by Israel in its prolonged conflict with Gaza are anticipated to impact its war strategies and methods, they are not expected to hasten a resolution to the war. Consequently, it is likely that Israel will persist in its campaign against Gaza, motivated by the imperative to secure a victory or semblance thereof.

This persistence is grounded in the belief that economic considerations, though acknowledged, will remain subordinate to the state's overarching strategic imperatives.

Views expressed by writers in this section are their own and do not necessarily reflect Jordan News' point of view.

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