Israel's economic rebound hinges on a limited conflict

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.