Israel's conflict with the Hamas militant group is anticipated to have a significant economic impact, with an estimated cost of approximately 197 billion shekels ($53 billion), according to a forecast from the country's central bank, the Bank of Israel.
The breakdown of the projected cost includes around 107 billion shekels for defense expenditures, 22 billion shekels for damage compensation, and 25 billion shekels for other civilian expenditures. Additionally, interest on government debt is expected to reach 8 billion shekels, with a projected loss of tax revenue amounting to 35 billion shekels due to the conflict.
The forecast operates on the premise that the direct economic impact of the war will continue into 2024, gradually diminishing in intensity. In light of these projections, Israel's GDP growth is expected to be 2 percent in both 2023 and 2024, reflecting a decrease from the earlier forecasts of 2.3 percent for 2023 and 2.8 percent for 2024.
Given the anticipated high expenses and a substantial reduction in tax collections, the Bank of Israel predicts a rise in the government's debt from 60.5 percent of GDP in 2022 to 63 percent in 2023, further increasing to 66 percent by the end of 2024. These economic projections provide insights into the financial challenges that Israel may face in the aftermath of the conflict with Hamas.
(With Agency Inputs)
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