Iran Press/ West Asia: It might seem obscene to assess the mounting financial cost of Israel’s war in Gaza while the bombs are still falling on the besieged enclave, when hundreds of Palestinians, on average, are dying each day — alongside smaller, but historic, numbers of Israeli soldiers.
And yet, the economics behind the weeks-long assault have powerful implications for Israel, the Palestinians and the Middle East.
The cost to Gaza, while clearly devastating, has not yet begun to be calculated. About half of the buildings and two-thirds of the homes in the Strip have been damaged or destroyed, 1.8 million people have been displaced and more than 21,000 people have been killed, according to the Gaza Health Ministry.
The Israeli economy has been damaged, too. Some economists compare the shock to the Israeli economy to the coronavirus pandemic in 2020. Others say it might be worse.
Since Oct. 7, when Hamas and allied fighters streamed out of Gaza to kill about 1,200 Israelis and take 240 more captive, government spending and borrowing have soared, tax revenue has plummeted and credit ratings could take a hit.
And gross domestic product will fall — from forecasts of 3 percent growth in 2023 to 1 percent in 2024, according to the Bank of Israel. Some economists predict contraction.
The impact on Israel’s high-tech sector — the engine of the economy — is sobering.
Many Israel Defense Forces reservists work in the tech sector. Every day they fight in Gaza, their employers struggle to continue investing in research and development and maintain market share.
Policymakers and opinion leaders are now asking: How will the cost of the war influence its duration? When will the government decide to declare victory, stop the fiscal hemorrhaging and resume efforts to grow the economy?
Economists interviewed by The Washington Post estimated the war has cost the government about $18 billion — or $220 million a day.
Zvi Eckstein, a former deputy governor of the Bank of Israel and an economist at Reichman University, recently ran the numbers with colleagues and reported that the impact on the government budget — including decreased tax revenue — for the fourth quarter of 2023 was $19 billion and would probably be $20 billion in the first quarter of 2024.
That assumes the war does not expand to Lebanon.
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