Buildings in Tel Aviv after they were hit by a missile fired by the Palestinian (French) resistance

The British newspaper The Economist considered that the welfare state in Israel has received a strong blow due to its continued aggression against the Gaza Strip after the economy contracted, prices rose, the number of unemployed increased, and warnings increased about the cost of the war launched by Israel on the Gaza Strip.

After the first three months of the war, Israel's economy shrank by more than a fifth, at a rate of 20.7% on an annual basis.

Exports fell by more than 18%, and imports fell by more than 42%.

In the same period, 750,000 people - one-sixth of the workforce - were unemployed. The construction and agricultural sectors lost more than half of their workers, and the high-technology sector also received a strong blow.

Tourism collapses

In the field of tourism, the number of tourists to occupied Jerusalem alone fell by more than 77% during the holiday season.

Data from the Israeli Bureau of Statistics revealed that inbound tourism - during the last quarter of 2023 - is the worst since the “Al-Aqsa Intifada” at the beginning of the current millennium, with the exception of the Corona period, attributing the matter to the repercussions of the “Al-Aqsa Flood” operation launched by the Palestinian resistance on October 7. First past.

Since the beginning of the Israeli aggression on Gaza, the losses of the Israeli tourism sector have continued, as most international tourism companies have canceled their trips to Israel, and the Israeli company El Al has now operated about 80% of flights to Israel, with most flights of other international companies halted.

Figures from the Israeli Statistics Center show that 180,000 visited Israel during the last quarter of last year, and this number includes Israelis outside Israel, which represents a decline of 81.5% on an annual basis compared to 2022, when the number of tourists in the last quarter reached 930,000 tourists.

The total number of tourists - according to figures issued by the Israeli Central Bureau of Statistics - during the entire last year reached 3 million tourists who visited Israel, compared to 4.5 million in 2019, and Israel expected to receive 5.5 million visitors in 2023.

Additional expenses

In the last quarter of last year, the occupation army's additional military expenditures amounted to $8 billion, an amount equivalent to 2% of the gross domestic product alone, in addition to expenditures on the displaced and support for injured soldiers and the families of the dead.

Additional expenditures and a decline in resources prompted the government a few days ago to borrow $8 billion in the largest bond sale in Israel's history, according to Bloomberg.

Israel's bond issuance comes at a time when it is looking to continue the war on the Gaza Strip.

Uday Patnaik, head of emerging markets fixed income at Legal & General Investment Management, said Israel has significant financing needs this year due to the war and “I would not be surprised if they need to issue more.”

According to Bloomberg, the credit default swap (the cost of protecting against default) remains high, among other places in the Israeli economy where there is concern due to the war.

Moody's lowered Israel's rating by one level to "A2" last February, which is the first downgrade ever for the occupying state.

Late last month, the British Financial Times newspaper quoted the Accountant General of the Israeli Ministry of Finance, Yali Rotenberg, as saying that Israel plans to borrow $60 billion this year, freeze government employment and increase taxes, after its military spending nearly doubled as a result of its war on the Gaza Strip.

It is expected that Israel will need to issue more bonds. According to the Financial Times, the government plans to raise about $70 billion, which will raise the proportion of public debt to 70% of the gross domestic product.

This is in addition to freezing government employment and increasing taxes. Last week, the Knesset agreed to raise the tax rate on banks to 26% to raise about $700 million over the next two years.

The situation is getting worse

Amid these repercussions, Israeli Prime Minister Benjamin Netanyahu is seeking approval from the Knesset for the amended budget, which includes added military spending of about 15 billion dollars, which raises the value of the budget to more than 160 billion dollars, an increase of more than 13% over the original budget that was set before the war.

All of this prompted The Economist to say, “If Israel remains under Netanyahu’s bad management, the situation will get worse, but even if he steps down, it will have difficult choices between increased military spending and the welfare state that it was, which is what the director of the Tel Aviv Stock Exchange warned that Israel may turn into a poor state within 10 years if the cost of war does not stop.

Source: Al Jazeera + agencies