Israel's economic growth increased at a slower rate during the year 2023 due to the war on the Gaza Strip (Al Jazeera)

A preliminary estimate by the Israeli Central Bureau of Statistics showed - today, Monday - that Israel's economy shrank by 19.4% on an annual basis in the fourth quarter of last year, affected by the war waged by the occupation in the Gaza Strip.

The office stated that the contraction recorded in the last quarter was driven by the deterioration of all sectors, at a time when the level of investment declined by 70%.

According to the data, Israel's economic growth slowed to 2% for the entire year of 2023 compared to 6.5% in 2022.

But this reflects a negative growth in per capita GDP of 0.1%, due to population growth last year.

Private consumption contracted in the fourth quarter by 27%, and was accompanied by a contraction in public consumption of approximately 90% during the same period, on an annual basis.

The statistics office said, “The economic contraction in the fourth quarter of 2023 was directly affected by the outbreak of war with Gaza... The composition of the gross domestic product changed after the widespread mobilization of reserve soldiers, payment of alternative housing costs, and labor shortages in construction.”

Israel's gross domestic product grew by 2.5% on an annual basis in the period from July to September last year compared to the previous three months, down from a previous estimate of 2.8%.

Projections of the Research Division of the Central Bank of Israel estimate that the war on the Gaza Strip will consume, on average, about 3% of the gross domestic product by the end of 2024.

The Israeli war on Gaza broke out after an attack launched by the Palestinian resistance, led by the Islamic Resistance Movement (Hamas), on the seventh of last October on southern Israel in response to Israeli violations against the Palestinians and their sanctities.

With the exception of 2020, when the Corona virus struck the world, and the Israeli economy contracted by 2.5%, the last time the economy contracted was in 2009, in the wake of the global financial crisis.

In the whole of 2023, the main hit to the economy was the level of investment, which fell by 2%, and per capita consumption, which fell by 2.8%.

These data come a few days after Moody's lowered Israel's credit rating to "A2" from "A1" with a negative outlook, which is the first downgrade in the history of the occupying state.

Moody's said at the time that the reason for lowering Israel's credit rating was the war with Hamas and its repercussions, while the agency expected the debt burden in Israel to rise above expectations before the war on Gaza.

It warned that the risks of escalation of the conflict with Hezbollah still exist, increasing the possibility of a significant negative impact on the Israeli economy.

Source: Al Jazeera + agencies