Economic Costs of War: a Lesser Misfortune for ‘Israel’

Al-Carmel Editorial Team, Orinoco Tribune,  December 23, 2023 —

Since the start of the Al-Aqsa Flood Operation on October 7, 2023, economic experts anticipated a substantial impact of the war on the “Israeli” economy. Indeed, figures released by “Israeli” newspapers and media revealed significant economic losses compared to previous wars waged by the enemy. However, this wasn’t surprising.

The negative economic indicators of the occupying entity are deemed “natural consequences,” as markets and economic estimations are affected by general conditions in any country, especially during periods of instability, whether financial, security-related, or social. The instability resulting from a war initiated by the enemy, particularly one of the longest and most perilous in its history, exacerbates these effects.

Moreover, discussions about an economic and financial crisis, along with warnings of capital and emerging companies fleeing the occupied territories, preceded the war on Gaza. Since the disputes regarding amendments aiming to curtail the powers of the “Israeli” Supreme Court and restructure the judiciary, leading to deep divisions among “Israeli” parties and various factions, concerns escalated about the political crisis affecting the economic situation within the entity.

Today, there seems to be little left of the warnings about an economic collapse. All fears regarding the loss of capital and its repercussions on financial markets and currency value have receded. It appears as if the current economic situation is the “smallest misfortune” for the zionist entity right now.

This can be attributed to several reasons:

• The support of the United States, Western nations, and global capital standing by the occupying entity, ready to provide various forms of support—financial, political, diplomatic, or military. This manifested in the halt of capital outflow from the Israeli market abroad and in additional funding provided by the “Israeli” government through bond issuances since October.
• The strength of the Israeli central bank, represented by foreign currency reserves exceeding $200 billion.

Why does this matter?
Relying on an economic collapse in the entity to halt the war is a form of “selling an illusion” to the public. What can halt the war is the resilience of the people of Gaza, the capability of the Resitance to prevent the entity from achieving its goals, the support Gaza might receive from the West Bank or from fronts in Yemen, Lebanon, and Iraq, or fundamental changes in public behavior in Jordan and Egypt and in other Arab normalization countries, as well as in Islamic countries allied with “Israel” or having good relations with it.

“Israel’s” losses according to the Israeli Central Bank since the beginning of the war:

• Losses in the next two years are estimated to reach about 198 billion shekels ($53.4 billion), approximately 10.2% of the Gross Domestic Product.
• War losses include direct military costs, compensations to companies and damages incurred by families, loss of tax revenues.
• Compensations expected to be paid by the government for direct and indirect damages are estimated at about 47 billion shekels ($6 billion).
• The expected loss in tax revenues is estimated at around 35 billion shekels ($9.4 billion).
• The loss due to increased interest rates on government debt is estimated at 8 billion shekels ($2.15 billion), contributing to the rise in the cost of public debt.
• The general budget deficit will rise to about 3.7% in 2023 and 5% in 2024. This deficit will be covered through borrowing, which means the cost of public debt will also increase.
• The debt-to-GDP ratio will rise to approximately 63% in 2023 and 66% in 2024, compared to 60.5% in 2022.

Solutions to all these problems for “Israel” originate from the United States. The occupation government awaits financial “aid” packages from Washington, which have not yet received congressional approval due to political tensions within the United States.

Since the beginning of the war until the present:
The value of the “israeli” currency, shekel, rose from 4.08 shekels per USD at the start of the war to 3.7 shekels per USD currently.

• The Israeli Central Bank had to intervene in the market to maintain the currency value.
• By November 7, the foreign currency reserves of the Central Bank had decreased by an amount close to $8 billion. These reserves were utilized to maintain the shekel’s exchange rate.
• The Central Bank secured $15 billion from reserves. Most of these reserves were used in October, whereas in November, according to Hebrew media, the Israeli Central Bank injected no more than $300 million.
• At the outset of the war, the Central Bank announced the provision of $30 billion for sale in the market to uphold the value of the “Israeli” currency.
• This implies that the rulers of the entity do not fear for their economy. Their concern lies in the strategic consequences of the war, which could potentially amplify if the occupying army fails to achieve the aggression’s set objectives.

Given this reality, it can be argued that the steadfastness of resistance in Gaza, the emergence of regional forces ready to support resistance in Palestine, and a decline of Jewish migration to occupied Palestine by 70% between October 7 and November 29, all pose more dangerous consequences for the entity than economic and financial losses which the West can compensate.