On the big chessboard of the economy, Israel is facing an unprecedented dilemma. The GDP data for the fourth quarter of 2023 hit the heart of the country's economy like a heavy punch - a 20% decline, and the war brought not only gunsmoke and death, but also a heavy blow to domestic economic life.
Israel, a country that rises in the desert, has long been known for its strong economic resilience and ability to innovate in science and technology. However, the protracted conflict has brought the country's economy to a standstill. The 150,000 Palestinians who were originally employed were denied access to Israel because of the smoke of war is not just a number, but a pillar of Israel's low-end labor market. Their absence has left many industries in trouble.
The relocation of settlers to safe areas and the need for State support have undoubtedly increased the financial pressure. Tourism, the industry that once brought Israel countless foreign exchange earnings, has collapsed. Military superiority, on the economic battlefield, does not seem to translate into victory. Israel, once known for its military might, is now facing economic growth. To ease fiscal pressures, Israel** plans to raise $60 billion from the bond market.
However, the severity of the economic problems has necessitated the adoption of emergency measures, freezing the number of employees, controlling wages, raising taxes, and these measures are undoubtedly another shock to the economic life of the country. The increase in the defense budget to 20 percent and the fiscal deficit to 6 percent of GDP speak to the struggling state of Israel's economy.
However, even in such a difficult situation, Israel's finance minister remains confident. He believes that high-tech and infrastructure investment is the key to getting out of the predicament. But there is an internal consensus that easing the economic pressures of the war is the priority. The planned reduction of reservists at the end of March in order to boost economic activity is undoubtedly a positive sign.
Hamas and Jihad, two long-standing rivals to Israel, may see the fragility of the Israeli economy and try to exert more pressure. However, it remains unclear whether they will opt for a protracted war as an option. Because, for Israel, the choice between war and peace is not only a matter of military victory or defeat, but also of economic survival.