The Palestinian Islamic Resistance Movement (Hamas) reached an agreement with the Israeli occupation for a ceasefire in the Gaza Strip after a war that lasted about 15 months in which tens of thousands of Palestinians were martyred and wounded in the Strip.
As the date for the implementation of the agreement approaches, on January 19, attention is focused on the economic losses resulting from the war on Gaza, amid skepticism about the loss figures announced by Israel, which Calcalist newspaper has not hidden.
This week, the newspaper questioned the Israeli government’s announcement that the fiscal deficit would reach 6.9% of GDP in 2024, or about 136 billion shekels ($36.1 billion).
She pointed out that the reality seems bleaker, as analyzes show that the real deficit reaches 7.2% of GDP, or about 142 billion shekels ($37.7 billion).
At the end of 2023, the Israeli Ministry of Finance expected that the 2024 budget would record a deficit of 4.9% of GDP, compared to an actual deficit of 4.2% in 2023.
While Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich celebrated a figure below 7% of the deficit, Israelis are suffering from high costs of living and slow economic growth, Calcalist adds.
It is noteworthy that Israel reviewed its announced growth rates more than once, especially with the beginning of its war on the Gaza Strip, to reveal greater declines.
The budget deficit worsened
The Israeli budget deficit witnessed fluctuations throughout 2024, but gradually increased with the escalation of military operations.
Here’s a monthly look at the evolution of the deficit:
- January: The deficit reached 4.5% at the beginning of the year.
- February: It rose to 4.8% as a result of increased defense spending to confront regional tensions.
- March: The deficit recorded 5.2% as military preparations intensified.
- April: The deficit reached 5.7% due to ongoing security concerns.
- May: Increased to 6.1% as the government implemented additional spending measures.
- June: The deficit reached 6.6%, the declared annual target.
- July: Israel’s budget deficit continued to rise, reaching 7.0% of GDP.
- August: The deficit exceeded the annual target and reached 7.5%.
- September: It rose to 8.5% as a result of the escalation of the war in Gaza and Lebanon, with spending amounting to 103.4 billion shekels ($28 billion).
- October: The deficit fell slightly to 7.9%.
- November: The deficit rose again to 8.2%.
- December: The deficit stabilized at 7.7%.
Huge losses due to the war
According to the Israeli Ministry of Finance, Israel has incurred up to 125 billion shekels ($34.09 billion) since the start of the war on the Gaza Strip on October 7, 2023.
The ministry added last Monday that Israel recorded a budget deficit of 19.2 billion shekels ($5.2 billion) last December, noting the high expenditures to finance the wars in Gaza and Lebanon.
It seems that these are the direct costs of the war without taking into account the repercussions caused by the war on various aspects of life in Israel. The Israeli economic newspaper Calcalist indicated that the cost of the war on the Gaza Strip amounted to about 250 billion shekels ($67.57 billion) until the end of 2024. .
The newspaper relied on estimates from the Bank of Israel, and explained that the amount includes “direct security costs, large civilian expenses and revenue losses, but not everything.”
The deterioration of the tourism sector and the closure of companies
- Due to the war on Gaza and other fronts, the tourism industry coming to Israel deteriorated by more than 70% during the past year, compared to 2023.
- Tourism has declined by more than 80%, compared to the peak year before the Corona pandemic in 2019.
- According to data from the Israeli Bureau of Statistics, incoming tourism declined to 885,000 tourists and visitors during the first 11 months of 2024, amid expectations that it will reach 952,000 tourists in the entire year.
- In the first 11 months of 2023, the number of tourists who visited Israel reached 2.95 million, while their number in the whole of 2023 reached about 3 million tourists, according to official data.
- According to a report published by the Israeli “Wasla Economics and Business” website (exclusive), based on government data, about 60,000 companies and small and medium enterprises will close their doors in 2024, an increase of 50% compared to previous years.
- The report indicated that many tourism companies were affected and closed their doors as a result of the conflict.
- The number of tourists deteriorated significantly during the Israeli war on Lebanon. While the number of tourists arriving in August 2024 was about 304.1 thousand, it declined to approximately 89.7 thousand tourists last September.
- The number of tourists continued to decline to 38.3 thousand tourists last October, before rising slightly to 52.8 thousand tourists in November 2024, according to data from the Israeli Bureau of Statistics.
- The business information company Covis BDI expected in a report last July that 60,000 companies would close in 2024, due to the repercussions of the ongoing war on the Gaza Strip, according to the Times of Israel.
- Covis BDI CEO Yoel Amir was quoted at the time as saying, “No sector of the economy is immune to the repercussions of the ongoing war… Companies are dealing with a very complex reality: the fear of escalation of the war coupled with uncertainty about when the fighting will end and ongoing challenges such as shortages.” employees, decreased demand, increasing financing needs, increased procurement costs and logistical problems.”
Paralysis in the Israeli construction sector
The Israeli construction sector was paralyzed after the outbreak of the war on the Gaza Strip and the prevention of Palestinian workers from working in Israel. Statistics last August indicated the following facts:
- Weekly losses for the construction sector amounted to $644 million.
- 50% of construction sites were closed due to a shortage of manpower.
- The expected delay in new apartment deliveries was 36 months.
- The labor shortage in the Israeli construction sector reached 140,000 workers.
Last October, the Central Bank of Israel warned senior bank officials against their exposure to the construction and real estate sectors, stressing the need to “carefully manage risks during this period,” and the bank detailed its requirements for banks in terms of updated risk assessment in this area, according to Bloomberg. .
According to Bloomberg, before the outbreak of the war on the Gaza Strip in October 2023, a third of the workers on Israeli construction sites were Palestinians, but the Netanyahu government prevented about 150,000 Palestinian workers from the West Bank from entering Israel, citing security concerns, and promised to replace them and bring in foreign workers. Others.
Decline in investments
Last October, the Associated Press quoted economic experts as saying that Israel had begun to suffer a significant decline in foreign investments, as investors were concerned about the security situation.
According to the Times of Israel, based on Ministry of Finance data, the value of foreign investment deals declined in the first half of 2024 by 28% on an annual basis to $11.8 billion.
According to a report by the Globes newspaper, investment in venture capital (for startups) for Israeli companies declined by 6% from October 2023 to September 2024, along with a sharp decline of 30% in the number of foreign and Israeli investments.
Poverty rates worsen
The 2024 poverty report in Israel, issued last December, stated that about a quarter of Israelis live below the poverty line, while 65% of Israelis have been financially affected, which heralds the collapse of social resilience in the country due to the ongoing wars.
According to a report by the Latet Humanitarian Relief Organization, excerpts of which were published by Yedioth Ahronoth and Israel Today newspapers, 32.1% of Israelis witnessed a deterioration in their financial conditions during the past year, while about a million Israelis face difficulty in paying basic bills.
Also, about half of the children in supported families suffer from psychological problems and poor academic achievement, while more than half of the elderly in this group give up medication and suffer from increased feelings of loneliness and anxiety.
Future losses
The Calcalist newspaper described the cost of the war on Gaza as “heavy” and that it reflects the “failure” of the war on the Strip, explaining that this requires “the need for a significant increase in the budget of the Israeli Ministry of Defense during the next decade.”
She said, “The (future military) budget consists of purchasing more planes, helicopters, armored personnel carriers, and large quantities of weapons and ammunition, as well as investing in people or the Israeli soldier himself.”
The newspaper pointed out that “the revenues from natural gas in the Mediterranean were supposed to go to the Ministries of Health and Education, but it seems that they will go to the Israeli Ministry of Defense.”
The committee examining the security and defense budget, known in Israel as the “Nagel Committee,” after the name of its chairman, Yaakov Nagel, recommended that the required addition to the Ministry of Defense in the next ten years would be 275 billion shekels ($74 billion), meaning an addition of 27.5 billion shekels ($7 billion). In one year.
On January 7, the Israeli newspaper Jerusalem Post quoted the committee’s report as “proposing to increase the defense budget by up to 15 billion shekels annually ($4.1 billion) over the next five years.”
