Israeli economy threatened with additional burdens amid war on Gaza
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The Bank of "Israel", led by Governor Amir Yaron, has already allocated $30 billion in foreign exchange to bolster the shekel, which has reached an eight-year low.
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A billboard welcoming US President Joe Biden who arrived on a visit to Palestine to express solidarity with "Israel", Oct. 18, 2023 (AP)
Writer Liz Alderman wrote in an article for The New York Times that the current war on Gaza is threatening to bring about widespread "regional instability", with potentially severe economic consequences alongside the already devastating human toll.
"Israel's" economy, which was considered "robust and entrepreneurial" until recently according to Alderman, is now faced with serious challenges.
The Palestinian economy was in a precarious state even before "Israel" imposed a siege on Gaza in response to the October 7th operation, leading to what the World Health Organization termed a "humanitarian catastrophe."
The IMF's assessment this year highlighted that "Israel's" blockade of Gaza and increased restrictions on the West Bank were severely detrimental to economic growth and private sector development.
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On another note, the mobilization of up to 360,000 Israeli reservists for military service has caused parts of the economy to come to a standstill.
The technology industry, which has been a key driver of growth, has experienced a sudden slowdown, and production at a major offshore natural gas field has been halted. To prevent the Israeli shekel from collapsing, the central bank has committed billions of dollars.
"Israel's" economy was once hailed as the fourth-best-performing in the OECD. The start-up sector attracted substantial foreign investments, and the 2020 Abraham Accords held the promise of increased economic growth.
But this year saw a stumble in the economy due to Prime Minister Benjamin Netanyahu's plans to curtail the judiciary's powers. This move prompted significant public protests, with many tech leaders threatening to leave.
The judicial overhaul also resulted in a steep 60 percent drop in foreign investment, contributing to a devaluation of the shekel, volatile fluctuations in the Israeli stock market, and challenging economic conditions marked by high-interest rates, rising inflation, and concerns about a global economic slowdown.
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This week, two credit rating agencies issued warnings about the potential downgrade of "Israel's" debt. On Friday, Moody's described the current conflict as more severe than previous instances of violence, which could divert resources in the economy, reduce investment, and erode confidence.
Fitch, on Tuesday, raised concerns about an increased risk of the conflict expanding into large-scale, prolonged military confrontations with multiple actors, a stark contrast to its assessment of "Israel's" strong economic growth just six months ago. A rating downgrade might result in higher interest rates for "Israel's" borrowing.
However, Goldman Sachs noted on Monday that, for the time being, the risks to "Israel's" financial and economic stability seemed lower than during previous major conflicts. They attributed this to "Israel's" stronger overall finances and its substantial foreign exchange reserves, which amount to around 40% of the country's GDP.
The Bank of "Israel", led by Governor Amir Yaron, has already allocated $30 billion in foreign exchange to bolster the shekel, which has reached an eight-year low.
The POS Netanyahu and his criminal ZIONIST cronies have been getting their money out of Israel in advance of their planned genocide of the Palestinians.
— Dr.SHIVA Ayyadurai, MIT PhD. Inventor of Email (@va_shiva) October 19, 2023
This HUGE drop in Shekel v $ indicates big outflows from Israel since Jan 1 2022-today. pic.twitter.com/IPVkz9kpfX
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On the other hand, Palestinians in Gaza and the West Bank have long suffered economic hardship, and the recent siege of Gaza has only worsened their plight.
The IMF's annual review in August highlighted the significant economic challenges faced by the Palestinian people, including persistent poverty and high unemployment.
"Israel's" siege of Gaza following the Hamas operation on October 7th has resulted in severe infrastructure damage, critical shortages of food, water, gasoline, and other essentials, and the displacement of approximately half of Gaza's over two million residents.
There is concern that an expansion of the conflict to include Hamas's ally, Hezbollah in Lebanon, could exacerbate regional hardships.
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Various Israeli sectors, including tourism and transportation, have already been significantly affected, and even tech companies are facing disruptions. Natural gas investments in the region may also suffer, impacting "Israel's" plans to become a gas export hub.
"Israel's" central bank governor expressed optimism about the regime's ability to recover from difficult periods. But the presence of numerous reserve soldiers on the front lines and civilians taking shelter due to rocket attacks will undoubtedly impact economic activity, he says.
