Israel's economic rebound hinges on a limited conflict
A long war with Hamas followed by a re-occupation of Gaza would send Israel into recession and have long-term effects on foreign investment, the government’s fiscal position, and consumer and business confidence.
![An elderly woman stands with an Israeli flag next to another holding a sign showing the faces of young Israeli hostages held by Palestinian militants since the October 7 attack near Azrieli Mall in Tel Aviv on October 18, 2023. (Photo by AHMAD GHARABLI / AFP) (Photo by AHMAD GHARABLI/AFP via Getty Images)](/sites/default/files/styles/article_hero_medium/public/2023-11/GettyImages-1730663592.jpg?h=1d34674f&itok=_gswfMcU)
Al-Monitor Pro Members
David Rosenberg
Israeli reporter specializing in business, economics and politics
Nov. 2, 2023
The Israeli economy has already taken a hit from the country’s 27-day-old conflict with Hamas. Economic activity has been brought to a halt in much of the south and reserve call-ups have been enormous, creating labor shortages and disrupting supply chains. A long war with Hamas followed by a re-occupation of Gaza would send Israel into recession and have long-term effects on foreign investment, the government’s fiscal position, and consumer and business confidence. These fall-outs would be more severe if a second front develops with a militarily more powerful Hezbollah in Lebanon. However, a long-war scenario for now seems unlikely. More probable is a conflict, measured in weeks and limited to Gaza. If so, the fourth quarter will see a sharp decline in Israel’s gross domestic product, with economic activity rebounding over the course of the first quarter of 2024.