Governor of the Bank of Israel (Central Bank), Amir Yaron, expected today that the costs of the war would reach… Gaza strip 10% of GDP. The statements came after the bank’s Monetary Policy Committee meeting. In his speech, he warned of major economic impacts, whether on real activity or on financial markets.
He added that “there is a noticeable negative impact on Israel’s economy during the first weeks of the war,” and pointed out that the Central Bank built its expectations regarding the Israeli economy on the assumption that the impact of the war would continue until next year, and stressed that the expectations were made on the assumption that the war would be mostly on the Israeli front. One, which is Gaza, without opening the rest of the fronts.
War costs include direct expenses associated with military operations and reconstruction efforts.
The estimates of the Governor of the Bank of Israel are consistent with estimates published earlier this month by the Israeli National Economic Council (governmental), which indicated that the cost of the war may reach 200 billion shekels ($54 billion).
It represents 10% of Israel’s gross domestic product, amounting to approximately $52 billion, according to the country’s GDP figures for 2022, which amount to approximately $520 billion.
Last week, a study issued by an Israeli consulting company showed that Israel’s losses due to the war on Gaza may reach $48 billion during the current and next years.
The report issued by Leader Capital Markets, a financial consulting firm in Israel, stated on Thursday that Israel is likely to bear two-thirds of the total costs, while the United States will pay the rest in the form of military aid.
Last month, the Israeli Ministry of Finance estimated that the war costs the economy $270 million daily, noting that the end of the war does not mean the losses will stop.
Maintaining the interest rate
Meanwhile, the Bank of Israel announced that interest rates would remain unchanged at the level of 4.75%, which is the highest since 2007 according to historical data on interest rates issued by the Bank of Israel, in a statement issued today.
Indicators of economic activity during the war indicate an initial contraction in commercial activity, with some gradual recovery in recent times, according to the statement.
The Bank of Israel’s Research Department lowered its GDP growth forecast to 2% in both 2023 and 2024, compared to 3.5% in previous estimates.
The bank added that government expenditures due to the war are estimated at 160 billion shekels ($43 billion). The debt-to-GDP ratio is expected to reach 63% in 2023, and 66% in 2024, from 58% in 2022.
In the credit market, the bank indicated a slowdown trend in bank credit to small and micro-enterprises, adding: “The Bank of Israel has activated a number of targeted policy tools to support the process of providing credit to this sector.”
“While the volume of activity in the housing market is still moderate, and the industry is facing difficulties as a result of the war… in the past 12 months, house prices fell by 0.2%,” the statement added.
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2023-11-27 16:59:34
