By Juan Cole / Informed Comment
Ann Arbor (Informed Comment) – Israeli Prime Minister Benjamin Netanyahu’s insistence on continuing his total war on Gaza is not only inflicting untold misery on thousands of innocent civilians in Gaza but is also hurting the economic well-being of Israelis.
According to the Israeli newspaper Arab 48, the Israeli economy’s gross domestic product per capita contracted 0.4% in the second quarter, compared to Q2 2023, once adjusted for population growth.
Overall, GDP in April-June was down 1.4% year over year.
Trade results in the private sector, excluding the public sector, declined by 1.9%.
The results show a continued shrinking of the Israeli economy, with GDP having plummeted by a huge 20.6% in Q4 of last year, and having declined by 1.1% in the first quarter of this year.
The government increased its spending on the war and on evacuating tens of thousands of Israeli residents from their homes near Gaza or in the north near Lebanon by 8.2%. Heavy government spending caused the inflation rate to rise to 3.2%.
The Times of Israel reports that GDP contracted in Q2 both compared to the previous quarter and to the same period last year.
The contraction was owing in large part to a 8.3% decline in exports of goods and services. It was the third quarter in a row that Israel’s exports fell. In Q4 of last year they fell 23% amid the outbreak of the war on Gaza, and again 3.6% in Q1 of 2024.
Israel’s economy has been downgraded by Fitch from A+ to A on expectation that the war will continue into 2025.
The Lebanon front has contributed to the downturn, with thousands displaced from the north and investors nervous about the outbreak of war.
Tourism income declined from $1.4 billion in Q3 of 2023 to only $464 million in the past quarter. So reports Business Insider, which also estimates that 46,000 Israeli businesses have closed since the war began. Tens of thousands more are at risk.
TOI quoted Jonathan Katz, chief economist at Leader Capital Markets, as saying that supply bottlenecks contributed to the slowdown, as did a 26% fall in construction investment because of the lack of — get this — Palestinian laborers! Israel is at full employment, given the call-up of reservists into the army, and the labor shortage is also a big drag on the economy.
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Juan Cole
Juan Cole, a TomDispatch regular, is the Richard P. Mitchell collegiate professor of history at the University of Michigan. He is the author of The Rubaiyat of Omar Khayyam: A New Translation From the Persian and Muhammad: Prophet of Peace Amid the Clash of Empires. His latest book is Peace Movements in Islam. His award-winning blog is Informed Comment. He is also a non-resident Fellow of the Center for Conflict and Humanitarian Studies in Doha and of Democracy for the Arab World Now (DAWN).
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