Severity of Israel’s downturn hinges on conflict moves

Significance

Israel’s war with Hamas is taking a growing toll on the economy mainly due to labour shortages. The economy has recovered quickly from previous short wars, but this conflict already exceeds them in terms of duration, manpower needs and supply chain disruptions: the economic downturn will be greater and recovery will take longer.

Impacts

• Prolonged evacuation of about 3% of the population from their homes near the Gaza and Lebanon borders will cause multi-faceted disruptions.
• The key high-tech sector will be seriously affected by a sustained reserve call-up, due to the age and gender profile of its workforce.
• The war will disrupt government finances, with spending growing quickly and reduced economic activity cutting tax revenue.