GDP growth in Israel in 2023 came at a low rate of 2% and recorded a negative growth of 0.1% per capita during the last quarter of 2023 (French)

Occupied Jerusalem

 - The war on Gaza has placed the Israeli economy facing great challenges, as its repercussions began to unfold in various aspects of economic and social life and the labor market, and the rise in the consumer price index, unemployment and poverty rates, amid the decline in the gross product and negative growth.

The growth of the gross product in Israel stopped in 2023 at a low rate of 2% and recorded a negative growth of 0.1% per capita during the last quarter of 2023 when the war broke out in Gaza, compared to a growth of 6.5% in 2022, according to data from the Israeli Central Bureau of Statistics.

The effects of the war on the Israeli consumer and their lives were evident in a decrease in private consumer spending by 0.7% in 2023 after an increase of 7.4% in 2022, and the per capita share of private consumption decreased by 2.8% in 2023.

Height and disability

Compared to private consumption, spending on government consumption increased by 8.3% in 2023 after an increase of 0.1% in 2022. Spending on civilian consumption also increased by 3.8%, while expenditures on security rose by 26.6%. The large increase reflects the exceptional expenses incurred by the Israeli government following The war on Gaza.

Imports of goods and services decreased in 2023 by 6.9% after rising by 12% in 2022, and exports of goods and services decreased in 2023 by 1.1% after rising by 8.6% in 2022.

The current balance of the government sector in 2023 reached a deficit of 80.5 billion shekels, compared to a surplus of 4.4 billion shekels ($22 billion) in 2022.

The sharp increase in the deficit is mainly due to the increase in government expenditures and the decrease in its income from taxes due to the war. In terms of GDP, the current account deficit in 2023 reached 4.3% of GDP, compared to a surplus of 0.2% in 2022.

Poverty and high prices

Regarding the impact of the war on prices in the food sector, an analysis by the Research Division of the Bank of Israel indicates an increase in the consumer price index by about 12% of the consumer basket, which is affected by changes in the availability of raw materials, goods, and the labor component, as well as by changes in production techniques.

The consumer price index rose by about 12% of the consumer basket (Getty)

“A social and economic emergency in light of the war is expected to exacerbate poverty in Israel,” with these words the Israeli organization “Lateit” described in the “Alternative Poverty” report the socio-economic situation of families in Israel.

The report's data indicates serious effects of the war on the economy in Israel. According to the Israeli organization, the income of 19.7% of the public has been damaged since the beginning of the war, and 45.5% fear that their economic conditions will deteriorate due to the war.

According to the National Insurance Institute’s report on poverty for the year 2022, 1.98 million people live below the poverty line, or about 20.9% of the population of Israel, noting that 20.2% of families are poor, while the percentage of children living below the poverty line has risen to 28.2%, as it is expected The poverty rate increases due to the war.

Homes and real estate

The repercussions of the war on the real estate sector became apparent, as the year 2023 recorded a decrease in the number of homes and real estate sold, as last year ended with the sale of approximately 66,590 apartments, a decrease of 34.9% compared to 2022, according to the Israeli Central Bureau of Statistics.

According to the data, 41.9% of the total apartments sold are new apartments, meaning approximately 27,930 apartments, a decrease of 30.7% compared to the year 2022, in which 110,000 new and old residential apartments were sold.

The data indicates a continued increase in the supply of new unsold apartments, which at the end of December 2023 amounted to about 67,760 apartments, which is a new record in this sector, as real estate companies need 27 months to sell all the apartments remaining in the supply, according to Correspondent of the economic newspaper "Calcalist"

Work and unemployment

The Israeli labor market has not recovered as the war on Gaza enters its fifth month, as unemployment rates remain high, as the official unemployment rate in Israel reached 3.4% in January 2024, or about 151 thousand people, compared to 3.1%, or about 140 thousand in December 2023, an increase of 11 thousand, according to a statement issued the day before yesterday, Monday, by the Israeli Central Bureau of Statistics.

Unemployment rates increase when the number of employees who have been placed on unpaid leave is added to them, as unemployment reaches approximately 215 thousand people, or about 4.8%, which is a significant decrease compared to December 2023, when about 271 thousand people were included. That is, 6.1%, while this number reached 365 thousand last November.

Expensive and deflation

This comes at a time when researchers and economic analysts have repeatedly warned of the consequences of the collapse of the general government sector in social care, education, health, and transportation services, and they unanimously agreed that the repercussions of the war, negative growth, and economic stagnation will put Israel facing countless problems.

In reading these data, Gad Lior, economic affairs editor at Yedioth Ahronoth newspaper, confirmed that the contraction in the Israeli economy in the last quarter of 2023 is a direct result of the war that broke out on October 7.

Israeli State Comptroller Netanyahu Engelman warned of the continued rise in the high price index in Israel (Anatolia)

Lior explained that the Israeli economy was mainly affected by the widespread mobilization of reserve forces in the Israeli army and alternative housing payments for the displaced from the “Gaza envelope” and the Israeli border towns with Lebanon in accordance with government programs, in addition to the labor shortage in industry, construction and agriculture.

Prices and debts

In turn, Israeli State Comptroller Netanyahu Engelman warned of the continued rise in the price index in Israel, saying, “The cost of living in Israel has risen significantly, and the year 2024 opens with more price increases in various aspects of life.”

The Israeli observer added in a report on the cost of living in Israel that "the damage caused by the war on various sectors, along with high interest rates, make things very difficult for the local economy in Israel, including reservists and all Israeli families."

He pointed out that the price level in Israel is higher in terms of purchasing power by about 27% on average, and the gap in the food industry is even higher, amounting to 37% compared to OECD countries, and 51% compared to European Union countries.

In the Israeli observer’s report on the cost of living, it was also noted that, as of 2023, the stock of Israeli household debt to the financial sector and banks reached about 770 billion shekels ($208 billion), which is a sharp increase of about 49% compared to 2017.

Crisis and erosion

In reading the data, journalist Dror Marmor, deputy editor-in-chief of the economic newspaper “Globus,” confirmed that in the wake of the war, per capita growth in Israel became negative, indicating that the economic crisis created by the war requires Israeli society to recalculate its path, saying, “If we do not do that... Israel is on its way to becoming a third world country.”

Marmor explained that the war had negative repercussions on various Israeli economic sectors, as it eroded the gross product, reduced the personal security of Israelis, and contributed to the decline in purchasing, shopping, and entertainment capabilities.

He pointed out that the war contributed to the decline in foreign investments, while government spending increased mainly on security to buy tanks and missiles or to pay compensation to affected commercial interests and rehabilitate victims as a result of the war.

So far, apart from the psychological and social distress during the war and expected the next day, Marmor says, “The expected cost of the war is about 250 billion shekels ($68 billion), and that is another burden of 100,000 shekels ($27,000) per family on average.” ".

Source: Al Jazeera