Israeli media warn of bleak economic outlook amid Gaza war

Israeli media have cited economists warning of a dangerous economic outlook in store for the regime amid its continued war on the Gaza Strip.

Israeli media on Monday, cited economists sounding the alarm over the regime's economy being at risk, warning that Israeli businesses cannot withstand the mounting economic pressures much longer as the genocidal war on the Palestinian people in Gaza has stalled tourism, forced businesses to close, slowed down shipping and raised Israeli budget deficit.

“The economy right now is under huge uncertainty, and it’s related to the security situation — how long the war will go on, what the intensity will be and the question of whether there will be further escalation,” said Karnit Flug, the Israeli regime’s former central bank chief who is currently running a think tank in Israeli occupied Al-Quds.

The Zionist regime launched its genocidal war on Gaza almost 11 months ago and despite international outrage over the mass killing of innocent Palestinian people, it is showing no signs of ending the onslaught, while even provoking regional players to escalate the fighting into a wider conflict.

Flug warned the current situation is unsustainable and Tel Aviv will either have to cut back on public spending, or increase taxes. Either way, the public will be discontent.

“The 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,” Flug noted.

Israeli economist, Yacov Sheinin, who has been an adviser to Israeli premiers and ministries for decades, said the total cost of the war could amount to $120 billion, or 20 percent of the country’s gross domestic product (GDP), a broad measure of economic activity.

The Israeli GDP was expected to grow by 3 percent in 2024. However, it is now predicted to drop by 1.5 percent, or lower if the regime does not end the war this year.

American credit rating agency Fitch, earlier this month, downgraded Israel’s rating following similar downgrades by S&P and Moody’s.

“In our view, the conflict in Gaza could last well into 2025,” Fitch warned in its rating note, which cited the possibility of “significant additional military spending, destruction of infrastructure and more sustained damage to economic activity and investment.”

Israeli Finance Ministry this month said the country’s deficit over the last 12 months passed over 8 percent of GDP, far exceeding the 6.6 percent deficit-to-GDP ratio the ministry had previously projected for 2024.

The rising budget deficit coupled with The Big Three credit rating agencies' downgrade have put mounting pressure on Tel Aviv to end the war and reduce the deficit — something that would require unpopular decisions such as cutting spending or increasing taxes.

According to Sheinin, the best way to save the Israeli economy is to end the war on Gaza. “But,” he pointed out, “If we are stubborn and continue this war, we will not recover.”

Meanwhile, the right-wing Israeli Prime Minister Benjamin Netanyahu has been trying to downplay the economic repercussions of the nearly 11 months war on Gaza, claiming the economic damages and losses were only temporary.

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Netanyahu aims to keep his coalition in power, and his hardline flank, including Finance Minister Bezalel Smotrich, wants the war to continue until all Gazans are done.

Nonetheless, the months-long war on Gaza has created a big strain on Tel Aviv's budget, including the cost of rebuilding, compensating reserve soldiers, and vast military spending.

It has also forced thousands of small businesses to close, laying off thousands of workers, and compromised international trust in the Israeli economy and industries which was once considered to be one of the most advanced economies in the world, boasting innovative industries such as high-tech, cleantech, and the life sciences, Israeli media reported.

Accordingly, 46,000 Israeli businesses have closed since the start of the war on Gaza, Israeli business information company CofaceBDI reported.

Israeli media cited some of the leading Israeli economists as saying that a Gaza ceasefire is the best way to decrease the extent of damage and loss to the regime's economy and ease Tel Aviv’s added strain.

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