Israel Economy: Consequences of Israel-Hamas War
Almost three weeks have passed since the Israel-Hamas war started on October 7th. The shekel fell to its lowest level against the dollar in over a decade, prompting Israel's central bank to support the currency by selling $30 billion in foreign exchange reserves.
Already, The Bank of Israel has estimated their depletion of economic growth for 2023 to 2.3% from 3%.
Israel’s $500 billion economy - the most developed in the Middle East - has been starting to collapse. Retailers are furloughing workers as hundreds of thousands of army reservists are called up, creating a severe personnel shortage and disrupting supply lines from supermarkets to seaports. "The Economy Ministry created a war room and put out a call for help. Its database has so far matched at least 8,550 people with struggling businesses". Firms from builders to restaurants have shut; credit card purchases are down 12%. All categories have seen a sharp decline, while there is a spike in shopping at supermarkets.
The “emotional crisis” among the Israeli public is the major problem. "People will minimize their consumption spending because of the uncertainty and the mood”, said Leo Leiderman, chief economic adviser to Bank Hapoalim. With the continuing trend, it’s to be seen that the damage to the economy will be significant.