Gaza war hits Israeli economy with a 19,4% contraction in the 4th quarter.
The war interrupted economic growth, especially with the massive conscription of reservists and the displacement of tens of thousands of people from border towns.
Reuters Israelis drastically reduced spending, travel, and investment at the end of 2023, with Israel's war against Palestinian Hamas militants in Gaza having a major impact on the economy, according to data released on Monday.
The war disrupted economic growth, especially with the massive call-up of reservists and tens of thousands of people displaced from border towns near Gaza and Lebanon due to constant rocket attacks by Hamas and Hezbollah.
The $500 billion economy contracted by 19,4% in the fourth quarter on an annualized basis compared to the previous three months, the Central Bureau of Statistics reported in an initial estimate of gross domestic product (GDP). The announced contraction was double the expectation indicated in a consensus surveyed by Reuters.
Nevertheless, 2023 as a whole ended with positive growth.
"The contraction of the economy in the fourth quarter of 2023 was directly affected by the outbreak of the War of the Iron Swords on October 7," the statistics agency said.
Throughout 2023, the Israeli economy grew by 2,0%, compared to 6,5% in 2022, but above the Organisation for Economic Co-operation and Development (OECD) average of 1,7%. However, GDP per capita fell by 0,1% last year, compared to the OECD average growth of 1,2%.
Until the cross-border Hamas attack on October 7 in southern Israel, Israel's economy was on track for growth of around 3,5% in 2023. But October was a particularly difficult month, with most Israelis -- many of whom knew the people killed or kidnapped in the attack -- unwilling to shop, while cinemas and other forms of entertainment were largely closed, although they are now open.
Depending on the duration of the conflict and its expansion to other fronts, the economy is expected to grow by up to 2% in 2024. The central bank and others expect a strong economic recovery in 2025, based on the view that Israel's economy is fundamentally sound, led by the high-tech sector, and has demonstrated resilience after previous conflicts.