As the country reels from the deadliest attack on its territory on October 7, companies’ trade on half-empty streets has collapsed.
Before war broke out between Israel and Hamas, Jeremy Welfeld’s brewery in the Israeli town of Emek Hefer produced 50,000 litres of beer a month, while his 14 restaurants around the country drew in thousands of customers each day.
Rocket fire from Palestinian militants in Gaza – and increasing tensions with Iran-backed Hezbollah militants in Lebanon – has prompted large areas on its northern and southern borders to be evacuated. “We are ahead of a long operation, and it will take a serious toll on the Israeli economy,” he says. “People are cancelling holidays, parties, events. People are staying at home. The kids are at home, so lots of people can’t work.” Schools across Israel have switched to remote learning.
In the areas of southern Israel around Gaza that bore the brunt of Hamas’ assault, the signs of economic pain are everywhere. Before the war, Sderot was a town of 30,000 people. By this week, it was a ghost town: more than 90 per cent of its population has been evacuated, rows of shops are shut, and traffic lights at intersections blink permanently orange.
But Rafi Gozlan, chief economist at IBI Investment House, says that with the ratio of debt to national output at a lower level of about 60 per cent and the central bank sitting on about $US200 billion of foreign exchange reserves, Israel is going to war on a better footing than in previous conflicts.“This time is quite different. It allows both the Bank of Israel and the government to finance the necessary budget deficit that’s going to increase quite sharply,” he says.
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