The ongoing conflict in Gaza has sent shockwaves through Israel’s economy, resulting in the shuttering of thousands of businesses, straining public finances, and plunging entire sectors into crisis. The British newspaper Financial Times highlighted the profound economic repercussions Israel has been facing since the surprise attack by Palestinian resistance factions on October 7. This has led to consecutive airstrikes on Gaza, with a tragic toll of over 10,000 casualties. The military response has also seen about 350,000 reserve soldiers, representing 8% of the workforce, called up, effectively putting the country on a war footing.
The war’s devastating impact on economic activity is becoming increasingly evident. A survey by Israel’s Central Bureau of Statistics found that one in three businesses had closed or were operating at 20% capacity or less since the conflict began. More than half reported a drop in revenue by 50% or more. The situation is dire in the south, closest to Gaza, where two-thirds of businesses have either ceased operations or scaled down to the bare minimum.
In parallel, the Ministry of Labor reports that 764,000 Israelis, or 18% of the workforce, are not working due to reserve duty call-ups, evacuations, or child care demands due to school closures. Prime Minister Benjamin Netanyahu has vowed to establish an “economy under arms,” promising substantial cash transfers to businesses and areas at risk, on a scale surpassing last measures during the COVID-19 pandemic.
Netanyahu emphasized on Thursday, “My directions are clear: We are opening the taps and pumping money to whoever needs it… Over the past decade, we have built a very strong economy, and whatever the economic cost this war imposes on us, we will bear it without hesitation.”
Yet, experts express concerns that such measures may not suffice if the conflict continues. Some suggest that the support package must be accompanied by a reassessment of government spending priorities.
