Economic impact of the Israel-Hamas war in Israel - statistics & facts
The Israel-Hamas war started on October 7, 2023, following the invasion of Palestinian militants into Southern Israel. The attack ignited a multi-front war which has become one of the longest and most costly wars in Israeli history. By many indicators, the initial shock of the Hamas attack had a sudden impact on local and international markets. Israeli consumers were hit with a crisis of confidence and consumer spending dipped in the short term. However, as the war drags on, increased public expenditure is straining national accounts. The question remains: how will the government balance its budget? And will their consolidation efforts satisfy international creditors? In the absence of this, the country is likely to face further financial hardships that may impact its economy in the long term.
Government spending increasing rapidly
Following the outbreak of war, public sector spending increased by over 20 percent in comparison to the per war period. As people were displaced and moved away from regions affected by the war, the government stepped in to compensate their losses and fund their stay in temporary accommodation. Most significantly, the army’s budget grew almost two-fold, and greater military spending is expected to persist for the foreseeable future.
Businesses face workforce shortages
In the days following the October attack, business and commercial activities in Israel notably slowed. Almost one million Israeli employees and an estimated 150,000 Palestinians, were absent from their places of work within Israel for several weeks. Crucially, around seven percent of workers in the country's key high tech sector were mobilized by the military, many of them holding R&D roles at the heart of their companies' products. This is expected to negatively influence the performance of technology firms in the short term. Still, as the country settled into a new war-time routine, many of the initial negative impacts on businesses have moderated. Israeli employees have largely returned to work, consumer spending has picked up, and overall business activity in most of the country has recovered.
International trade remains stable
As a small country, Israel is highly integrated and dependent on global trade. Despite a deterioration in the country’s international standing, overall exports have not been impacted directly by the war. On the other hand, since April 2024 trade with Turkey has pronouncedly dropped, coming to a near halt after relations between the countries soured over the war. As Turkish trade is non-negligible to the Israeli economy, this may further impact the construction industry and other select consumer markets. Still, most of the county’s main trade partners such as the United States, and the European Union, have not altered their economic ties with the country.
In April 2024, the Israeli public expressed overwhelming concern about the lengthening war. Looking forward, the duration of the war will have a decisive influence on the economic health of the country and the impact of its new debts on national accounts. More importantly, as the war drags on, the already heavy human cost of war will continue to deepen.
Government spending increasing rapidly
Following the outbreak of war, public sector spending increased by over 20 percent in comparison to the per war period. As people were displaced and moved away from regions affected by the war, the government stepped in to compensate their losses and fund their stay in temporary accommodation. Most significantly, the army’s budget grew almost two-fold, and greater military spending is expected to persist for the foreseeable future.
Businesses face workforce shortages
In the days following the October attack, business and commercial activities in Israel notably slowed. Almost one million Israeli employees and an estimated 150,000 Palestinians, were absent from their places of work within Israel for several weeks. Crucially, around seven percent of workers in the country's key high tech sector were mobilized by the military, many of them holding R&D roles at the heart of their companies' products. This is expected to negatively influence the performance of technology firms in the short term. Still, as the country settled into a new war-time routine, many of the initial negative impacts on businesses have moderated. Israeli employees have largely returned to work, consumer spending has picked up, and overall business activity in most of the country has recovered.
International trade remains stable
As a small country, Israel is highly integrated and dependent on global trade. Despite a deterioration in the country’s international standing, overall exports have not been impacted directly by the war. On the other hand, since April 2024 trade with Turkey has pronouncedly dropped, coming to a near halt after relations between the countries soured over the war. As Turkish trade is non-negligible to the Israeli economy, this may further impact the construction industry and other select consumer markets. Still, most of the county’s main trade partners such as the United States, and the European Union, have not altered their economic ties with the country.
In April 2024, the Israeli public expressed overwhelming concern about the lengthening war. Looking forward, the duration of the war will have a decisive influence on the economic health of the country and the impact of its new debts on national accounts. More importantly, as the war drags on, the already heavy human cost of war will continue to deepen.
