Israeli Prime Minister Benjamin Netanyahu made his intentions clear on how his military would respond to the 7 October attacks on the country carried out by Hamas.
“Like never before,” he pledged.
“I said that every place from which Hamas operates will turn into ruins. It is already happening today and will happen even more in the future”.
The human cost of this escalation has already been heavy for Palestinians as well as Israelis. There will also be an impact on Israel’s economy, which was already under pressure from the country’s political crisis before its war on Gaza took a further toll.
These are the main economic factors Israel now faces after the start of a war.
Currency and confidence
The Israeli economy was already in trouble before 7 October.
Its currency, the shekel, had weakened from 3.53 to the dollar, reaching 3.84 in the week preceding the attack. In the second half of October, the dollar price in shekels hit 4.06. The Central Bank of Israel announced a $30bn intervention to support its currency.
Economic growth forecasts were already coming down.
For 2022, the value of all the goods and services produced by Israel’s economy – as measured by gross domestic product (GDP) – grew by an impressive 6.5%. By the summer, it was forecast to fall to 3%, and there was widespread public anger at the increased cost of living alongside bitter internal political divisions.
In September, the finance ministry reported that foreign investments were down 60% in the first quarter of the year from 2022. When an Israeli startup is sold to new owners, the average exit transaction dropped by around 80% in the same period.