Two months after the Al-Aqsa flood operation on October 7, and Israel’s sudden shift to a war economy, thousands of companies, especially small ones, face many risks, which threatens them with closure if the war on the Gaza Strip escalates and extends to other fronts, according to Bloomberg.
Among those who faced many difficulties was businessman Shlomi Toskia, whose company Elativa is located in the city of Rishon LeZion in the center of the country, and whose business has almost stopped waiting for a shift in the commercial tide.
Tuscia and thousands of small business owners are suffering from a radical change in the conditions of their activities, due to the call-up of 300,000 reserve soldiers, which is equivalent to 8% of the country’s workforce.
With the prevention of Palestinian construction workers and the travel of thousands of workers due to the state of war, this led to a blow to many economic activities. Mass evacuations from war-affected areas in northern and southern Israel have added to the unrest.
For Toskia, the economic fallout was immediate. Before the Al-Aqsa Flood, he had spent months preparing for what is usually one of the busiest times of the year, the period after the Jewish holidays in October.
After he was waiting to reap profits, he was forced to request loans to keep his business afloat and to cover the expenses necessary to live, but with interest rates rising to their highest levels in 17 years and the need for an expensive business plan as well, he turned away from banks and borrowed 250 thousand shekels ($66.7 thousand). From the Eugene Association, which specializes in helping small projects, companies, and non-profit organizationsAt a cheaper cost for individuals.
small projects
For his part, Eugene CEO, Saji Balasha, said, “On the eighth of last October, we held a management meeting in which we realized that Eugene would face a huge wave of demand…”
Eugene typically lends about $70 million a year, but it received applications for $58.2 million in the month through November 21 alone. Balasha said he expects demand for loans worth $364.8 million over the next six months, although this represents a “drop in the bucket.”
This is all the more worrying in a country where small and medium enterprises account for 62.3% of gross value added, which is higher than the average in the club of rich countries in the OECD.
Thousands of companies are threatened
It is expected that about 57,000 Israeli companies will close their doors this year, compared to 42,000 companies in 2022, with many of them affected by increased inflation and months of political unrest due to the proposed judicial amendment, according to a survey conducted by Coface BDI for the Marker economic newspaper. Israeli. She added that the economy usually adds 4,500 companies annually, but the total will decrease this year by 20,000.
Against this background, the country’s five largest banks increased provisions for credit losses to small businesses by about 8-fold compared to last year. Habu Alim Bank (the largest in the country) said in its results that areas ranging from tourism to real estate are facing “an additional decline in demand and difficulty in promoting projects.”
The government, already strained by the war, which is costing an estimated $270 million a day, responded by allocating NIS 18 billion ($5 billion) for business continuity grants in October and November, for which 80,000 companies have applied. . It also offered to be a guarantor for loans in some cases, and on Sunday Finance Minister Bezalel Smotrich extended the compensation until this month of December.
Six weeks after the war, a fifth of companies said they were still out of business, according to the Israeli Central Bureau of Statistics.
Companies, organizations and the 1,800-member Federation of Israeli Manufacturers criticize the government.
Balasha says the government failed to respond professionally to business needs during the war. He added, “We are in the largest war that Israel has witnessed in the past 50 years. The government must come up with highly creative and unconventional tools to move the market, even if those tools were unacceptable before the war.”
