Gaza war plunges Israel into economic crisis, and U.S. economy is paying the price

Occupied Jerusalem—— Israel faces many challenges that have plagued its economy since the beginning of the “new century.”al aqsa floods“This was launched by the Palestinian resistance movement on October 7 last year, and then the war started Gaza StripIt is facing difficulties it has never experienced before, prompting it to ask for billions of dollars in support from the United States.

In addition to the initial cost of the war, which is estimated at around $50 billion, the war has had an impact on various economic sectors in the Israeli market. These impacts resulted in varying degrees of damage to many facilities, especially branches in Israel. Construction, tourism, hotels, entertainment, cafes and restaurants, this is reflected in the disruption of hundreds of thousands of workers.

Given these effects, some estimates suggest… Economic GrowthShmuel Abramson, chief economist at the Treasury Department, believes that Israel’s economic growth will drop to only 2%.

As for next year, growth may only reach 1.6%, compared with the pre-war forecast of 3.4% growth.

prolong the war

Commenting on this issue, economic expert Dr. Nayef Khalidi believes that Israel is facing the reality of war on multiple fronts, so he believes that the war will exist for a long time and may last until 2024.

He believes that the protracted war is primarily due to the political dimension and the declared goals of Israel’s military leadership, which are summarized as an effort to impose a new security reality that will have consequences and consequences for Israel. Israeli economy.

Regarding the impact and initial impact of the war on the Israeli economy, Khalidi noted in his speech to Al Jazeera that due to the cost of the war, changes and revisions to the overall Israeli budget are expected, expanding the budget framework by approximately 45 billion shekels ($12 billion) ), reflecting the initial direct budget deficit caused by the war.

Disrupt the economic wheel

The conscription of more than 300,000 Israelis into the reserve forces disrupts the functioning of the economy and the labor market, Khalidi explained, noting that approximately 20 percent of the reserve forces are owners of business interests and companies, not to mention the Israeli Defense Ministry. The Finance allocates a budget for the expenditure of these forces and provides allocations for soldiers to take preventive measures to manage and manage their daily lives.

Not only that, the economic expert said, “Israel is witnessing for the first time the displacement of civilians in the south and north of the country, with about 300,000 Israelis being evacuated from front lines and towns near the war,” which puts a burden on the general budget.

In addition, Khalidi added that due to the war, Israeli local government elections originally scheduled for the end of October last year were postponed. This delay prevented the town budget from being approved and disrupted all work plans. and planning and infrastructure, construction and reconstruction projects, meaning disruption to contractors and companies providing services to local government.

Inflation worsens

Khalidi pointed to the problem of converting the shekel into foreign currencies, especially the U.S. dollar, as the shekel recorded a decline early in the war, prompting the Bank of Israel to intervene and sell some of its U.S. dollar reserves, with the aim of preventing financial inflation from increasing.

He pointed out that financial inflation will lead to rising prices, and war will lead to rising interest rates and disruptions to business projects. These factors will have a negative impact on economic growth.

The economic expert explained that due to the economic stagnation and slowdown caused by the war, households postponed economic, development, business and investment projects, which was considered a blow to economic growth and reduced national income. Tax revenue, pointing out that 90% of national fiscal revenue depends on taxation, and 10% comes from foreign trade.

government economic policy

Among the effects of the war on the Israeli economy, Khalidi stressed that the current government’s reliance on the Orthodox parties and the far-right coalition, whose policies were a burden on the pre-war economy, as many ministries and institutions were created for the purposes of the coalition, as They allocate budgets for the alliance’s goals, and the need to shift those allocations to support this effort is growing. warlike.

Given all these factors, axes and influences that cast a shadow on the economy, Khalidi said the Israeli army is asking for its budget to be doubled because the war in Gaza has exposed a certain degree of weakness in the Israeli regime. self-defense, so the army’s budget will double in the future.

The economist believes that next year, after the war ends, there will be many measures and directives that will make citizens pay the price, noting that Israel, whose economy relies on the technology industry and the arms trade, will not be able to bear the cost of the Gaza war alone, because It has the support of the United States. The initial amount is US$14 billion.

Rely on the United States

Khalidi believes that U.S. financial support for Israel during the war had an impact on protecting the Israeli economy in the first weeks of the war, noting that U.S. President Joe Biden is pushing for more financial support for Israel and its economy.

Given the expected impact and impact of the war on the Israeli economy, the economist explained that Israel has and is asking for more support from the United States, and Biden is pushing for unprecedented aid to Israel to deal with its crisis.

In this regard, Khalidi said: “Without the foreign support of the United States and the support of the Jewish community, the damage to the Israeli economy will be very serious.” Due to the impact of the judicial system, many foreign companies have withdrawn investment in Israel.

He spoke of the negative impact of international credit rating agencies giving a negative rating to the Israeli economy, as it would make foreign banks reluctant to lend to Israel or require more guarantees and charge high interest rates.

Given that Israeli Prime Minister Benjamin Netanyahu considers the war in Gaza to be an “existential matter” and that Israeli society agrees with this and has expressed its willingness to pay war taxes, the government will be required to reorganize documents, including its economic policies, according to Khalidi .