Israel’s economy experienced a significant contraction following the conflict with Hamas in Gaza, with official figures indicating a larger-than-expected decline.
Gross domestic product (GDP) fell by 19% on an annualized basis in the fourth quarter of 2023, equivalent to a 5% drop between October and December.
The Central Bureau of Statistics attributed this decline directly to the outbreak of the conflict on October 7.
The conflict between Israel and Hamas led to severe disruptions in spending, travel, and investment at the end of the year.
Private spending decreased by 26.3%, exports fell by 18.3%, and there was a substantial 67.8% decrease in investment in fixed assets, particularly in residential buildings.
Government spending, mainly on war expenses and compensating businesses and households, increased significantly by 88.1%.
Despite the sharp decline in GDP in the final quarter, Israel’s economy still managed to grow by 2% for the full year, although this was below the expected 3.5% expansion.
The outlook for Israel’s growth in 2024 is now anticipated to be one of the weakest on record due to the impact of the conflict.
Additionally, the conflict has affected trade routes, particularly in the Red Sea, where Houthi rebels, backed by Iran, have targeted cargo ships heading to the Suez Canal.
President Abdel Fattah al-Sisi of Egypt stated that these attacks have resulted in a significant reduction in Suez Canal revenue.
The Red Sea is a crucial route for global seaborne trade, with almost 15% of such trade passing through the area.
The Houthis have been carrying out strikes on ships they claim are linked to Israel or are heading to Israeli ports, resulting in disruptions to shipping.
Some of the world’s largest shipping companies had already stopped their vessels from passing through the strait even before these attacks.
In summary, the conflict between Israel and Hamas in Gaza has had far-reaching consequences, affecting not only Israel’s economy but also global trade routes.
Source-BBC
