Israel's economy slumps 20% as Gaza war takes toll

Jerusalem – The ongoing Gaza war has caused the Israeli economy to contract nearly 20% in the last quarter of 2023, according to the country’s Central Bureau of Statistics on Monday, almost double the market expectation.

"The contraction of the economy in the fourth quarter of 2023 was directly affected by the outbreak of the Iron Swords War on October 7," the statistics bureau said in a statement.

Israel's economy has been badly affected by its war with Hamas following the attack on Israel on 7 October 2023.

Preliminary figures released by the bureau showed that Israel's gross domestic product (GDP) shrank an annualised 19.4% in the final three months of last year.

It said the decline was driven by a 26.9% drop in private consumption, as confidence plummeted amid the Gaza war and households cut back on spending.

The decline was partially due to a dive in business activity as workers were called up for military duty and Palestinian employees were denied entry to Israel.

In the first quarter of 2023, the GDP growth rate was 3.1%, 2.8% in the second quarter and 2.7% in the third quarter.

For all of 2023, the Israeli economy grew 2%, down from 6.5% in 2022.

Israel has launched a deadly offensive on the Gaza Strip following a Hamas attack that Tel

Aviv says killed nearly 1,200 people. The ensuing Israeli attacks have killed nearly 29,092 and injured about 69,028 with mass destruction and shortages of necessities.

The Israeli war on Gaza has pushed 85% of the territory's population into internal displacement amid acute shortages of food, clean water and medicine, while 60% of the enclave's infrastructure has been damaged or destroyed, according to the UN.

Israel stands accused of genocide at the International Court of Justice. An interim ruling in January ordered Tel Aviv to stop genocidal acts and take measures to guarantee that humanitarian assistance is provided to civilians in Gaza.

During the last quarter of 2023, business investment in Israel plunged by 67.8%, while its exports declined by 18.3% and imports slipped by 42%.

Moody's, one of the world's largest credit rating agencies, last week lowered Israel's credit rating, saying: "The negative impact on the country's institutions and public finances ... may prove more severe than Moody's currently assesses."

The ratings are a guide for investors over assessing the risk of a country's bonds, based on factors such as economic perspectives and political risk.

During the last quarter of 2023, business investment in Israel plunged by 67.8%, while its exports declined by 18.3% and imports slipped by 42%