In Jerusalem’s Old City and Haifa’s flea market, business owners are feeling the heavy toll of the nearly year-long conflict between Israel and Hamas. The ongoing offensive in Gaza has led to widespread economic struggles in Israel, with souvenir shops closed, merchants struggling, and luxury hotels sitting half-empty.
The war with Hamas has taken a significant toll on small businesses in Israel, causing thousands to suffer losses and damaging the economy’s reputation as a thriving entrepreneurial hub. The former central bank chief of Israel, Karnit Flug, now Vice President of Research at the Israel Democracy Institute, believes that a cease-fire is crucial to mitigate further economic damage.
The impact of the conflict extends to Gaza, where the economy is in shambles, with mass displacement and unemployment. The fighting has resulted in extensive human casualties and economic devastation, with major implications for both Israeli and Gazan economies.
The drawn-out nature of the conflict has put significant strain on various sectors of the Israeli economy, including tourism, small businesses, and international trade. The port of Haifa has seen a decline in shipping activity, while tourism has been severely impacted by the ongoing violence.
Economists warn that the total cost of the war could reach $120 billion, representing 20% of Israel’s GDP. This has led to downgrades in Israel’s credit rating by major agencies, raising concerns about increased borrowing costs and long-term economic stability.
The Finance Ministry’s report of a substantial budget deficit further underscores the urgent need to end the conflict and implement measures to stabilize the economy. Tough decisions such as tax increases or spending cuts may be necessary to address the economic challenges exacerbated by the prolonged war.
As the Israeli government grapples with mounting economic pressures, the priority remains on finding a resolution to the conflict that would allow for recovery and growth. Economists stress that the quickest way to revive the economy is through ending the war, as further escalation could have devastating consequences on Israel’s financial health.
Despite some positive indicators like low unemployment rates, the broader economic landscape in Israel remains bleak, with numerous businesses closing and workers facing uncertainty. The road to economic recovery hinges on resolving the conflict and implementing strategic measures to stimulate growth and stability.
