Economic impact of the Israel-Hamas war in Israel - statistics & facts
The Israel-Hamas war started on 7 October, 2023, following the invasion of Palestinian militants into Southern Israel. The attack ignited a multi-front war, which included major operations in Lebanon, Yemen and a 12-day war in Iran. By many indicators, the initial shock of the Hamas attack had a sudden impact on local and international markets. Israeli consumers were hit with a crisis of confidence and consumer spending dipped in the short-term. However, as the war drags on, increased public expenditure is straining national accounts. The question remains: how will the government balance its budget? And how will the business sector withstand the burden of the longest, most costly war in the country's history?
In April 2024, the Israeli public expressed overwhelming concern about the lengthening war. Looking forward, the duration of the war will have a decisive influence on the long-term economic health of the country. More importantly, as the war prolongs, the already heavy human cost of war will continue to deepen.
Government spending increasing rapidly
Following the outbreak of war, public sector spending increased by over 25 percent in comparison to the per-war period. As people were displaced from affected regions, the government stepped in to compensate their losses and fund their stay in temporary accommodation. Most significantly, the army’s budget grew almost two-fold, and greater military spending is expected to persist for the foreseeable future. At a result, the debt to GDP ratio climbed by over six percentage points between 2023 and 2024.Businesses face labor shortages
In the days following the October attack, business and commercial activities in Israel notably slowed. Almost one million Israeli employees and an estimated 150,000 Palestinians, were absent from their places of work within Israel for several weeks. Crucially, around seven percent of workers in the country's key technology industry were mobilized by the military, many of them holding R&D roles at the heart of their companies' activities. Still, as the country settled into a new war-time routine, many of the initial negative impacts on businesses have moderated. Most employees have returned to work, and greater public spending has propped up consumption and decreased unemployment. Some sectors, such as the defense industry, have benefitted from greater demand.International trade remains stable
As a small country, Israel is highly dependent on global trade. Despite a deterioration in the country’s international standing, overall exports have not been impacted directly by the war. On the other hand, since April 2024 trade with Turkey has pronouncedly dropped, after Ankara implemented a trade embargo. Still, most of the county’s main trade partners such as the United States, and the European Union, have not altered their economic ties with the country.In April 2024, the Israeli public expressed overwhelming concern about the lengthening war. Looking forward, the duration of the war will have a decisive influence on the long-term economic health of the country. More importantly, as the war prolongs, the already heavy human cost of war will continue to deepen.
