Israel's economy is in danger of collapsing under the weight of war
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Photo: Collected
The journey of Shelly Lotan's food startup company in northern Israel has only just begun. Just over a year ago last October, Hezbollah began firing missiles across the border and the government advised everyone in the region to evacuate.
Two of his store's five employees were drafted, the Washington Post reported. Employees who weren't invited moved the startup's office to the basement of another employee's parents' house. This has slowed down investment in his business.
It's also been almost a year since the Hamas-led attack on Israel. There are no signs of a Gaza-Israel ceasefire and a potential invasion of Lebanon is looming. Because of the war, Lotan's business is almost at a standstill. Meanwhile, the country has a growing downstream effect on the economy due to the war between the two countries.
The current war started when the Palestinian armed group Hamas attacked Israel on October 7 last year. Many were killed, injured and many were kidnapped that day. A year of unrest and tragedy has threatened to collapse the country's economy.
The war caused Israel's credit rating to decline and the gross domestic product (GDP) to shrink rapidly. Thousands of businesses have been closed. A growing number of jobs have been lost. Companies are outsourcing work from remote locations.
Israel's military personnel are struggling to balance their core careers with military life, reports said. After October 7, 2023, 287,000 citizens joined the war as reserve troops. Israel's population is less than one crore. That is, more than one-fourth of the country's people are in the war zone. The big question is how the economy is doing in this situation.
Though Israel has a large high-tech industry. However, the country's construction and agricultural sectors have been severely affected by the cancellation of Palestinian work permits since October 7 last year.
Defense spending naturally increases during wars. Israel's defense spending has at least doubled in the past year. Israel's war losses could raise to 67 billion or 67 billion dollars by 2025, warns the country's central bank. The Central Bank of Israel made this prediction before Israel's ongoing attack on Lebanon. As a result, the actual loss will be much higher than this. Old Jerusalem's economy, heavily dependent on tourism, has collapsed. Many Palestinian businesses there have closed. It is unlikely that they will resume business in the near future.
Dan Ben David, head of Israel's Shoresh Institution for Socioeconomic Research told the Washington Post, Israel's economy is in great danger; the government has to come out of this situation. Now all the attention of the government is on the war. It shows no signs of ending.
Israel's economy is already strong enough. Basically, as a major center of technology and research sector, there are a large number of startup companies operating in that country. Israel is a big name in the world of research and development.
The tourists are gone:
As a result of the war, the country's tourism sector business has decreased by more than 75 percent. Jerusalem's Old City is already buzzing with tourists, but many of the area's shops are closed.
Business at Ayman Shawar's family bakery in Jerusalem's Old City has dropped significantly since October 7. Ice cream seller Abdul Quader Alami's business has also come down to zero.
He said he spends his days chatting with fellow Palestinian business owners. Many of whom have closed their businesses altogether. They cannot even think about future business. After working for several decades in waste and water drainage systems in the United States, he came to his country and started this business. If the business closes, I will starve.
He said, the economy was dependent on tourists, the tourists have left. There is no economy.
