War on Gaza to cost 'Israel' about 10% of 2024's GDP: Central Bank

By Al Mayadeen English
Source: News Websites
18 Jan 2024 17:29

The Israeli Central Bank has approved a cabinet-based budget aimed at delivering sufficient fiscal amendments that could stabilize the growing debt the occupation has collected since waging a genocidal war in Gaza.

Amir Yaron, Governor of the Bank of Israel, speaks at the 24th Jacques Polak Research Conference at the International Monetary Fund on Thursday, Nov. 9, 2023, in Washington (AP)

The Israeli Central Bank governor supported a cabinet-approved budget based on claims of delivering sufficient fiscal amendments that could stabilize the growing debt the occupation has collected since waging a genocidal war in Gaza.

According to Amir Yaron, the budget would plateau public debt at an estimated 66% of the gross domestic product for the foreseen years, compared to 2023's 62%.

Speaking at the World Economic Forum, Yaron told Bloomberg TV “Steps taken to stabilize Israel’s future debt are a very important statement to the markets.”

Referring to calculations, Yaron stated that the war on Gaza will cost the Israeli economy 10% of the 530 billion dollar GDP, and revenue will shrink by 2%.

The Israeli Central Bank also made interest cuts last month, reducing them to 4.5% when markets stabilized for a while. “We lowered the interest rate after we saw markets stabilize and inflation decelerating — it has just landed at 3%, the top of our target range,” Yaron said.

Moreover, he added that unprecedented negative demand for construction was the primary factor for the inflation shock. Yaron stated that in case the genocide financial spillover reintensifies, the bank's monetary policy will have to be more cautious.

"Israel's" fiscal policy: A worry for investors

This week, another 2024 budget was tabled after investors doubted the fiscal path "Israel" was taking as it continues prolonging the genocide in Gaza.

Previous warnings were made by the Bank of "Israel" concerning backlash from investors over the government's budget response to the war, highlighting the possibility of an increase in bond yields, the devaluation of the shekel, and the stagnation of the economy.

However, the fiscal program approved this week implemented measurements that aim at regulating the financial repercussions of war by establishing 5% ministry budget cuts to balance out spending spikes.

War on Lebanon can be 'lethal' to Israeli economy

Amid prolongations of the genocide in Gaza and threats of war on the northern front with Lebanon, the Israeli economy is expected to see major blows.

A report by NPR on Tuesday detailed that the Israeli economy is enduring more difficulties now that tensions have worsened along the Lebanese border.

The NPR reports that, for instance, The Golan Heights Winery owners said that not only tourism and visitors have dwindled since the outbreak of the war, but daily operations have been disrupted as well.

Although Hezbollah rockets haven't reached the winery location yet, the economic toll is evident. CEO Assaf Ben Dov notes that the winery's production schedule has fallen behind due to staff shortages caused by reservists being called up for active duty.

The broader economic impact depends on the settlers' decision to return. Fadlon stressed that for "Israel", the war's aftermath is not only about winning but also about restoring confidence in safety and normalcy. The financial toll is substantial, with the central bank estimating a total cost of $56 billion — nearly half of "Israel's" annual budget.

"It will affect the economy in these places in the long run in a way that could definitely be lethal," Fadlon said.