War is costing Israeli economy over $66.6 billion: Smotrich
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Israeli Finance Minister Bezalel Smotrich acknowledges that the ongoing war is the longest and most expensive war faced by the Israeli entity.
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Israeli occupation forces sleep on tanks in a staging area in northern occupied Palestine on October 1, 2024. (AP)
Israeli Finance Minister Bezalel Smotrich acknowledged that the ongoing "war is the longest and most expensive war in Israel’s history", with direct costs amounting to approximately 250 billion shekels ($66.6 billion) so far.
He further emphasized that this figure is likely to increase, stating, "We will all feel the need to finance this war, and it will not be easy for us."
Meanwhile, Gad Lior, a journalist for Ynet News, offered a sharp critique of Smotrich's presentation of the economic situation during an interview with Ynet Studio on Tuesday. He argued that Smotrich's analysis lacked a solid grasp of economic principles and failed to acknowledge the prevailing realities affecting the Israeli economy.
Lior highlighted Smotrich's characterization of Moody's report as "weak and absurd," stating that "economists in London will not lecture us." He warned that such remarks could encourage credit rating agencies to continue downgrading "Israel's" rating and pointed out that Smotrich's information about the headquarters of Moody's and its management was incorrect.
Lior emphasized that "in the dangerous situation affecting the Israeli economy during Smotrich's tenure, the minister dares to use harsh words attacking rating agencies due to his complete ignorance."
He added that "what is concerning is that the person at the helm of the economic system in Israel lacks an understanding of sensitive and complex economic processes."
In this context, he noted that there is a consensus among economists, both in "Israel" and globally, that the Israeli economy has not been managed responsibly over the past year.
Escalations with Iran, Hezbollah cost 'Israel' billions: Israeli media
Israeli daily Haaretz has lately highlighted the growing economic burden on "Israel" amid escalating tensions with Hezbollah and Iran, emphasizing that the budget will be breached for the third time this year. The article pointed out that the government has not adequately prepared for an expanded confrontation, raising concerns about the long-term fiscal implications of the ongoing war.
Haaretz reported that the recent escalation with Hezbollah and Iran has resulted in costs estimated between 10 to 20 billion shekels, which is approximately $2.6 billion to $5.2 billion.
The daily emphasized that these additional costs are calculated before considering the potential loss in tax revenues and the uncertainty surrounding 18 billion shekels (over $4.7 billion) in aid from the United States, whose arrival remains in doubt.
This development follows Standard & Poor's announcement on October 2 regarding an immediate downgrade of the occupation's credit rating, coupled with a negative outlook. This came just days after Moody's also issued a double downgrade.
In this context, the Bank of Israel projected in May that the costs arising from the war could reach 250 billion shekels (approximately $66 billion) by the end of next year. This figure encompasses military expenditures and government costs, including housing for thousands of settlers who have evacuated from the North and South. This amount represents roughly 12% of "Israel's" GDP.
It appears that these costs will continue to escalate as the war broadens, further inflating the financial burden on the occupying government and prolonging the return of settlers to the North.
Israeli economy shattering
In late September, as "Israel's" almost year-long genocide in Gaza spread and its credit rating was reduced once more, Smotrich, claimed that, while under stress, the economy remained robust.
"Israel's economy bears the burden of the longest and most expensive war in the country's history," Smotrich said on September 28.
Karnit Flug, a former governor of "Israel’s" central bank, told CNN that a more intense war will "take a heavier toll on economic activity and growth."
The war has drastically deteriorated the situation in Gaza, driving it into an economic and humanitarian disaster long ago, while the West Bank is "undergoing a rapid and alarming economic decline," according to a UN study released last month. According to a worst-case scenario developed by Tel Aviv University's Institute for National Security Studies, "Israel's" economy might contract much worse.
Prior to the war on Gaza, the International Monetary Fund predicted the GDP of "Israel" would increase by 3.4% this year in contrast to the current predictions of 1% to 1.9%. In addition, "Israel's" central bank cannot decrease interest rates to revive the economy since inflation is growing, fueled by rising salaries and ballooning government expenditure to support the war.
