The relentless war launched by the Israeli occupation has cast a grim shadow over the profound losses suffered by the Israeli government due to its brutal aggression on the Gaza Strip.
Initial Israeli assessments reveal staggering figures for the cost of the war on Gaza, which will weigh heavily on the occupying state's budget, amounting to approximately 200 billion shekels, or roughly 51 billion US dollars, as reported by Israeli newspapers like "Calcalist" and "Yedioth Ahronoth."
A report released last week by JPMorgan Chase Bank indicates that the Israeli economy may contract by as much as 11 percent on an annual basis during the last three months of the current year, as the savage warfare carried out by the occupying army in Gaza escalates.
These estimates from the bank are among the most pessimistic projections by Wall Street analysts to date, prompting investors to actively divest from Israeli assets.
The final quarter of 2023 appears poised to wipe out all the economic gains achieved by the Israeli economy over the course of the current year, due to the ongoing aggression against the Gaza Strip, which has now completed its first month.
The last instance in which the Israeli occupation experienced such a contraction was in 2020 when the economy was forced into lockdown due to the spread of the COVID-19 pandemic.
The Initial Cost of the Aggression
The Israeli newspaper "Yedioth Ahronoth" reports, "The initial estimate by the Ministry of Finance regarding the cost of the war on the state's treasury is premised on the assumption that the situation will not extend beyond a year, additional fronts will not be developed, and reservists will return to their regular duties soon."
The Israeli newspaper adds, "Although this estimate is preliminary and subject to significant variability, given various initial assumptions, the projected cost is expected to reach 200 billion shekels, roughly 10 percent of the gross domestic product."
Continuing, the newspaper notes, "The primary assumptions forming the basis of this estimate include the event's duration, expected to span between 8 months to a year, meaning its conclusion is anticipated near the end of 2024; the persistence of the current state of combat, largely centered in Gaza; the absence of a densely populated northern front; the imminent return of the 350,000 reservists to their regular duties; and the event's containment within the confines of Yemen and Iran."
The newspaper underscores, "Given the numerous assumptions and the inherent uncertainty surrounding them, the Ministry of Finance has optimistically pegged the figure at 200 billion shekels."
"Deterioration in the Tel Aviv Stock Exchange"
The Tel Aviv Stock Exchange has witnessed a significant decline, with the "Tase35" index plummeting by 15 percent. Some company stocks have dropped by more than 35 percent compared to their pre-war values.
The market capitalization of the stock exchange initially lost a staggering 25 billion dollars but began to recover some losses in the past week as early indicators of the expected war-related economic impact emerged.
Since the outset of the Israeli aggression until the end of October, shares of the five largest banks listed on the Tel Aviv Stock Exchange have suffered a 20 percent drop due to the ongoing conflict.
Both local and foreign investors have continued to divest from Israeli company stocks, particularly those of banks operating in the local market.
The five major banks within the Israeli occupation—Leumi Bank, Hapoalim Bank, Discount Bank, Mizrahi Tefahot Bank, and First International Bank of Israel—all experienced a 20 percent decline in their stock values during the events.
Last month, the exchange rate of the Israeli shekel against the US dollar hit its lowest point since 2012, reaching 4.08 shekels, before rebounding to an average of 3.94 shekels in the current month.
On October 9th last year, the Central Bank of Israel announced injecting up to 45 billion dollars in an attempt to stabilize the shekel's exchange rate. However, exchange rate figures indicate that the bank's plan has not been successful.
Agriculture and Food
The production of agricultural crops in Gaza was severely affected during the war due to a significant portion of the agricultural land being located within the settlements in Gaza.
Last month, the Israeli economic newspaper "Globes" highlighted the importance of the lands in the Gaza envelope region for Israel's agricultural food security. Ami Yifrach, the president of the Israeli Farmers Union, pointed out that "75 percent of the vegetables consumed in Israel come from the Gaza envelope, along with 20 percent of the fruits and 6.5 percent of the milk."
The area around Gaza, known as the "Israeli vegetable patch," also includes poultry and cattle farms, as well as fish farms.
Moreover, extensive agricultural lands in the north along the border with Lebanon experienced disruptions in crop harvesting due to security tensions with Hezbollah in Lebanon and factions in southern Lebanon.
Workforce
Regarding the labor force in Israel, the army called up 350,000 employees to join the military, representing 8 percent of Israel's total workforce.
This number is in addition to approximately 140,000 Palestinian workers who were employed in Israel but had their work disrupted since October 7th last year due to the ongoing war.
Exporters' unions and private economic institutions have called for the need to bring back the workforce to prevent an unprecedented economic deterioration.
According to "Yedioth Ahronoth" newspaper, based on data from the Ministry of Labor, about 18 percent of the labor force in Israel became unemployed after 26 days of the war. Additionally, 46,000 workers were either laid off or suspended from work. Since the beginning of the war on October 7th, approximately 760,000 workers have been affected due to the call-up of reservists and the evacuation of Gaza residents, who make up about 18 percent of the labor force in Israel.
From Stability to Negativity
Last month, credit rating agency Moody's placed Israel under review, anticipating the possibility of lowering its credit rating due to the ongoing war's consequences.
Credit rating agency Fitch followed a similar path, placing Israel under surveillance. Standard & Poor's also announced that it had changed its outlook for Israel's rating from stable to negative.
Warnings of a Major Collapse
Last week, 300 leading experts in the Israeli occupation issued a warning that the Israeli economy is going through a challenging period, necessitating immediate measures to prevent further damage.
They addressed a message to Prime Minister Benjamin Netanyahu and Finance Minister Tzachi Hanegbi, stating, "You do not comprehend the magnitude of the crisis facing the economy; you must act differently."
Among the signatories were Roni Hizkiyah, former bank supervisor and chief accountant; Ya'ir Avidan, former bank supervisor; Professor Jacob Frenkel, former Governor of the Bank of Israel.
The list also included Professor Hanan Hellmann from Harvard University, Haim Shani, former Director-General of the Ministry of Finance, and Professor Josh Angrist, Nobel laureate in economics for 2021, among others.