Israel’s economy shrinks more than expected on Gaza war

Since Israel invaded Gaza, in the wake of the Hamas attack in October, Israel’s economy has shrunk by more than expected. 

GDP – a key measure of a country’s economic health – fell by 19% on an annualised basis in the fourth quarter of 2023, according to the latest figures. 

That is the equivalent of a fall of 5% between October and December.

GDP was “directly affected” by the outbreak of the conflict, the Central Bureau of Statistics said.

More than 29,000 people in Gaza have been killed since Israel launched its military campaign. 

Experts said the data released on Monday by Israel’s Central Bureau of Statistics was much worse than had been expected.

The median estimate in a Bloomberg survey of analysts was for an annualised decline of 10.5%.

The Central Bureau of Statistics said the war had sharply curtailed spending, travel and investment at the end of last year.

It said private spending dropped by 26.3%, exports fell by 18.3% and there had been a 67.8% slide in investment in fixed assets, especially in residential buildings. The construction sector suffered from a lack of labour, due to military call-ups and a reduction in Palestinian workers.

Meanwhile, government spending, mainly on war expenses and compensating businesses and households, jumped by 88.1%.

Despite the sharp drop in GDP between October and December, Israel’s economy grew by 2% for the full year.

However, before 7 October, it had been expected to expand by 3.5%.