Vantage | How war is taking Israel towards its worst financial crisis ever

Israel’s persistent conflict with Hamas has not only led to a reduction in economic growth but has also triggered a series of economic challenges casting a shadow over the nation’s financial stability. As the Bank of Israel takes measures to mitigate the impact, the country faces a daunting economic landscape.

Economic consequences Reports indicate a significant shrinkage in Israel’s economy, with the shekel hitting a 14-year low. Simultaneously, the sovereign debt rating has been downgraded, prompting the central bank to issue warnings of severe fiscal repercussions. The urgency for a new budget implementation has been emphasised by financial authorities to address the mounting economic concerns. The economic cost of Israel’s war on Hamas is staggering with the central bank estimating it at almost $54 billion. This translates to a daily expenditure of approximately $270 million. The mobilisation of a substantial 3,60,000 troops, equivalent to 8 per cent of Israel’s workforce, coupled with the expulsion of Palestinian workers, has further strained the nation’s labour market. The resultant labour shortage has forced businesses to shut down, exacerbating the economic woes. Economists predict that if the conflict persists, it could cost Israel a significant portion of its GDP. The estimated impact stands at a substantial 10 per cent reduction in the Gross Domestic Product, signalling a potential economic downturn if the war lingers. Israel’s military spending escalates Continued military operations would place Israel among the world’s highest military spenders. Currently, the country has spent almost $54 billion, surpassing the military budgets of nations like France, South Korea and Japan. Further escalation could see Israel surpassing even Germany in military expenditures. Despite the escalating economic toll, Israel remains firm in its resolve to continue the war against Hamas terrorists until its goals are achieved. Prime Minister Benjamin Netanyahu has affirmed the commitment to eliminate Hamas, restore Gaza to its previous state and secure the release of all hostages. “Here is also the framework that says it is possible to free every additional day ten more (hostages). This is welcome. In the same breath, I also said to the president that at the end of the outline we will return with full force to achieve our goals: the elimination of Hamas, ensuring that Gaza does return to what it was, and of course the release of all our hostages,” said Prime Minister Netanyahu. However, if the military operations persist, Israel may face one of its worst financial crises ever. Uncertain ceasefire and public sentiment The current truce has provided temporary relief, with both sides pulling back military equipment and releasing hostages. However, uncertainties loom over the ceasefire’s sustainability. The war has taken a toll on both Israelis and Palestinians with civilians on both sides yearning for peace. “The extension (of the truce) is for our benefit, and it is also an Israeli demand, the Jews (Israelis) are also tired, the war is not only affecting us, but also them,” Palestinian resident said Yousef Al Rajabi. Israeli resident Yishai Palant said, “I believe that we need to continue the ceasefire, it’s very complicated because we want to win this war but first of all we need to show the world that the hostages are the first and we want peace, and bringing children and women home is the first thing and later we can continue the war.” As Israel navigates the delicate balance between national security and economic stability, the consequences of an extended conflict with Hamas become increasingly apparent. The war’s economic toll, coupled with the uncertainty surrounding the ceasefire, paints a challenging picture for Israel’s future. The nation stands at a crossroads where strategic decisions will shape not only its geopolitical landscape but also its economic destiny. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.