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Egypt's economy, already in a state of crisis, is now at risk of further damage due to Israel's conflict with Gaza and escalating tensions in the Red Sea, according to analysts; The country's economy, which is currently being sustained by external aid, is grappling with mounting public debt exceeding 90 percent of its GDP, capital outflows, and a depreciating currency against the US dollar.<ref>[https://www.aljazeera.com/news/2024/2/24/how-israels-war-on-gaza-is-bleeding-egypts-economy How Israel’s war on Gaza is bleeding Egypt’s economy] Retrieved 28 February 2024</ref>
Egypt's economy, already in a state of crisis, is now at risk of further damage due to Israel's conflict with Gaza and escalating tensions in the Red Sea, according to analysts; The country's economy, which is currently being sustained by external aid, is grappling with mounting public debt exceeding 90 percent of its GDP, capital outflows, and a depreciating currency against the US dollar.<ref>[https://www.aljazeera.com/news/2024/2/24/how-israels-war-on-gaza-is-bleeding-egypts-economy How Israel’s war on Gaza is bleeding Egypt’s economy] Retrieved 28 February 2024</ref>

=====Bleak outlook for tourism=====
Egypt's historical landmarks such as the pyramids, museums, resorts, and monuments have always been a magnet for tourists worldwide, contributing significantly to the country's economy. By 2022, approximately three million Egyptians were employed in the tourism sector. Prior to the outbreak of the conflict between Israel and Gaza, Egypt's tourism industry was already facing challenges in recovering from the impact of COVID-19. Despite showing signs of improvement, the recent events in Gaza and the crisis in the Red Sea region are expected to negatively affect the revenue generated from tourism. S&P Global Ratings predicts a decline of 10-30 percent in Egypt's tourism revenues compared to the previous year, potentially leading to a loss of 4-11 percent in foreign exchange reserves and a decrease in GDP.


==== Indonesia ====
==== Indonesia ====

Revision as of 10:37, 6 March 2024

The Israel–Hamas war has significant economic implications, not only for the involved parties but also for the global economy.

Palestine

Gaza's infrastructure and economy

Main article: Economy of the Gaza Strip

The war has caused devastating damage to Gaza's infrastructure and economy.[1] The war has resulted in upheaval and destruction on a scale never before seen in the enclave. The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) reported that over 41,000 homes were destroyed and over 222,000 were damaged.[2] The war also badly affected hospitals, schools, water and sanitation systems, and food security.[1]

By the end of December 2023, the Palestinian Central Bureau of Statistics estimated that the Palestinian economy had lost a total of $1.5 billion USD since the start of the conflict.[3] In February 2024, the World Bank reported that Gaza's economy had shrunk by 80 percent in the fourth quarter of 2023.[4]

Employment in Gaza

The war caused significant job losses in Gaza. As the war reached its one-month mark, 61 percent of employment in Gaza, equivalent to 182,000 jobs, was estimated to have been lost.[5][6]

West Bank

In February 2024, B'Tselem reported that Israel had restricted Palestinians in the West Bank from harvesting their olive trees, stating, "The 2023 harvest was especially important this year as the Palestinian economy is already struggling due to the war in Gaza – particularly because of the prohibition on labourers entering Israel".[7] According to U.S. Treasury Secretary Janet Yellen, "Blocking West Bank residents from working in Israel, it has a very significant negative effect on incomes in the West Bank."[8] The West Bank was also severely impacted by the Israeli decision to withhold the tax revenues.[9]

Israel

The war is costing the Israeli economy $600m a week due to work absences, according to the Bank of Israel. This is equivalent to about 6% of the weekly GDP.[10] The bank also stated that the estimate does not reflect total damage and did not include damages caused by the absence of Palestinian and foreign workers.[11] On the other hand, Israel's treasury minister said the daily direct cost of the Gaza war to her country is about $246 million.[12]

It has been estimated that if the war went on for eight to twelve months, the cost of the war to the Israeli economy would be more than $50bn, or close to 10% of GDP, according to Calcalist, citing early Ministry of Finance figures. The estimates assume the conflict is limited to Gaza, without further escalation with other parties, and relies on the 350,000 drafted reservists returning to work soon.[13]

The economic toll of this violence may cost Israel an estimated $400 billion in lost economic activity over the next decade – threatens Israel's economic future. For Israel, 90% of the economic shock will come from indirect effects: reduced investment, slowing productivity growth and labor market disruption.[14] Due to Israel suspending Palestinian work permits, it recruited workers from India and Sri Lanka to fill the gaps.[15]

In the final quarter of 2023, the Israeli economy shrank by 20% caused due to labour shortages in construction and from the mobilization of 300,000 reservists.[16] While Israel did still see economic growth of 2%, this was down from 6.5% growth in the year before the war. Further consequences of the war were that consumer spending declined 27%, imports declined by 42% and exports were reported to decline by 18%.

Israel's economy experienced a more significant decline than anticipated by market analysts, signifying the largest contraction in nearly four years, as reported by Israel's Central Bureau of Statistics' initial assessment. This downturn can be attributed in part to a decrease in business operations caused by the mobilization of workers for military service and the restriction of entry for Palestinian employees into Israel.[17] Private consumption was the primary factor behind the economic contraction, experiencing a significant decline of 26.9%. Additionally, business investment plummeted by 67.8%, while exports and imports decreased by 18.3% and 42% respectively. However, government spending partially offset these losses by increasing by 88.1%, primarily due to war expenses. According to the statistics office, Israel's economy in 2023 witnessed a modest growth of 2%, but it was lower compared to the previous year's figure of 6.5%.[18]

In November, the Bank of Israel projected that the war would incur a total expense of approximately USD53 billion until 2025. This estimation was based on forecasts of increased defense and other expenditures, coupled with a decline in tax revenue. The magnitude of military activity witnessed by Israel in terms of duration, intensity, and cost has not been observed in recent times. The 2014 Gaza War, also known as Operation Protective Edge by the Israel Defense Forces (IDF), lasted for over a month and had a significant impact on the Israeli economy. It resulted in an estimated loss of ILS7bn (USD1.96bn), excluding the expenses of reservist pay and air force weaponry. To restore financial stability, the government implemented a budget cut of ILS2bn (USD559m) across all ministries, except defense.[19]

Israel has committed to covering both direct and indirect damages resulting from the 7 October attack near Ashkelon, where numerous missiles launched by Hamas hit. This includes compensating businesses for lost turnover and ensuring salary payments for affected employees. To support this effort, the government has established a loan fund of ILS10bn (USD2.7bn) and is providing grants to businesses experiencing a sharp decline in sales. Predicting the overall financial impact of the conflict is difficult, given the uncertainty surrounding its duration. However, it is evident that Israel and the broader region will face tough economic times ahead. Its central bank has revised its growth forecast for 2024 from 3% to 2% and anticipates that GDP recovery to pre-war levels will take over a year. Despite these challenges, spending needs persist. The government recently increased the national budget by approximately USD19bn and projected a 6.6% deficit for the current year, largely due to war-related expenses. In response to these economic pressures, major credit-rating agencies such as Fitch Ratings, Moody’s, and S&P Global are evaluating Israel's A+ rating for a potential downgrade.[20]

Israeli claims of Chinese sanctions

Israel's high-tech factories reported on 25 December that they had been having trouble with electronic imports from China due to recent bureaucratic obstacles, leading to higher import costs and delayed delivery times.[21] Israeli officials also reported that China had refused to send workers to their country during the war against the backdrop of a worker shortage in Israel's construction and farming sectors.[22] China's actions were described as a de facto sanction.[23][21]

Global economy

The conflict has the potential to plunge the global economy into recession.[24] War could have significant repercussions on Europe’s economic landscape, impacting it through reduced regional commerce, stricter financial regulations, escalated energy costs, and diminished consumer assurance. Goldman Sachs underscored that the most crucial and potentially impactful method that strain could permeate the European economy was via the petroleum and natural gas markets.[25]

Economic disruption in the world

In a recent report, the World Bank issued a concerning warning on October 30 regarding the Israel-Gaza conflict. according to the mentioned report, this conflict has the potential to cause a significant global economic shock. One of the potential consequences could be a drastic increase in the prices of items such as oil, with projections suggesting that it can reach as high as $150 per barrel. This would have severe implications for the global economy, leading to higher food prices and potentially causing millions of people to go hungry. The mentioned report drawed parallels to the 1973 war, during which Arab members of OPEC, led by Saudi Arabia, imposed an oil embargo on the USA in response to their support for Israel.[26]

Yemen (Houthi) attacks

The Houthi attacks initially targeted ships with Israeli connections and later expanded to include assets from the U.S. and Europe. It is anticipated that these attacks will intensify if Israel proceeds with its invasion of Rafah in Gaza, with potential threats to undersea cables. According to experts, the destruction of these cables in the Red Sea could severely disrupt data and financial communications between Europe and Asia. Peter Krause, a political science professor at Boston College, has analyzed the war and its causes from an "inside-out" perspective. He refutes the popular argument that the Oct. 7 attack aimed to disrupt the normalization of relations between Saudi Arabia, the U.S., and Israel.[27]

Impact on countries

Bahrain

Bahrain's National Assembly suspended diplomatic and economic relations on 2 November,[28] citing a "solid and historical stance that supports the Palestinian cause and the legitimate rights of the Palestinian people."[29][30]

Egypt

Egypt, a nation grappling with a vulnerable economy, confronts further obstacles as a result of the ongoing conflict near the Gaza Strip. This confrontation possesses the capacity to disrupt the tourism sector and impede the importation of natural gas, thereby placing strain on Egypt's economy. The war in Gaza, unfolding along Egypt's border with the Sinai Peninsula, coincides with Russia's aggression towards Ukraine and the global impact of the coronavirus pandemic, both of which have laid bare the vulnerabilities of Egypt's economy.[31]

Egypt's economy, already in a state of crisis, is now at risk of further damage due to Israel's conflict with Gaza and escalating tensions in the Red Sea, according to analysts; The country's economy, which is currently being sustained by external aid, is grappling with mounting public debt exceeding 90 percent of its GDP, capital outflows, and a depreciating currency against the US dollar.[32]

Bleak outlook for tourism

Egypt's historical landmarks such as the pyramids, museums, resorts, and monuments have always been a magnet for tourists worldwide, contributing significantly to the country's economy. By 2022, approximately three million Egyptians were employed in the tourism sector. Prior to the outbreak of the conflict between Israel and Gaza, Egypt's tourism industry was already facing challenges in recovering from the impact of COVID-19. Despite showing signs of improvement, the recent events in Gaza and the crisis in the Red Sea region are expected to negatively affect the revenue generated from tourism. S&P Global Ratings predicts a decline of 10-30 percent in Egypt's tourism revenues compared to the previous year, potentially leading to a loss of 4-11 percent in foreign exchange reserves and a decrease in GDP.

Indonesia

The ongoing conflict between Hamas and Israel is predicted to have repercussions on Indonesia's economy, specifically in the industrial domain. Bobby Gafur Umar, the leader of the Manufacturing Industry at the Indonesian Entrepreneurs Association (Apindo), highlighted that any turmoil in the Middle East would impact the business environment in Indonesia, particularly in the energy sector. A direct consequence of this war is the surge in energy prices, consequently resulting in a rise in the expenses associated with raw materials. This is primarily because Indonesia cannot produce all the required raw materials domestically.[33]

India

Indian experts are expressing their apprehension about the ongoing conflict, as they fear it may have adverse effects on the Indian economy. The escalating oil prices are expected to raise import costs, consequently leading to an increase in prices for commodities and food items. This situation poses a significant challenge for the Indian economy.[34]

Lebanon

The olive trade in southern Lebanon, which is the main source of income for many, was halted as farmers stopped their harvests in fear of the active shelling.[35][36] According to the Minister of Agriculture, 40,000 olive trees were burned down by fires caused by IDF shelling.[37]

The Institute of International Finance predicted that Lebanon's GDP could decline by one percent by the end of the year and by 30 percent in 2024 in the event of further spillover of the war.[38]

Brand boycotts

Pro-Palestinian protest in Ottawa, Canada, 23 Nov 2023

The brand boycott was a notable aspect of the war's economic implications. Brands such as McDonald's, Coca-Cola and Starbucks faced consumer boycotts over their support of Israel;[39] reflecting anger at Western governments' support for Israel.[40][41][42][43][44]

Campaigners in Derry, Northern Ireland persuaded O'Neills to remove Puma products due to the sports brand's sponsoring of the Israeli Football Association.[45] Starbucks was targeted in Keighley, West Yorkshire, with protesters smashing the shop's windows, following the corporation's decision to sue the Starbuck Workers United union after the labour organisation posted on social media support for Palestine.[46]

Direct action was taken at arms factories in the United States and the United Kingdom that supplied arms to Israel, such as Lockheed Martin,[47][48] General Dynamics,[49] Textron,[50] Boeing,[51] L3Harris,[52] Raytheon Technologies and Northrop Grumman.[53] For instance, on 10 November 2023, trade unionists in Rochester, Kent, blocked the entrances to a BAE Systems factory, stating the facility manufactured military aircraft components used to bomb Gaza;[54] and on 16 November, Palestine Action occupied a Leonardo factory in Southampton, stopping production.[55] ZIM was barred from entering ports in Malaysia.[56]

International Monetary Fund

The growth forecast for the entire Middle East-North Africa (MENA) region has recently been revised downwards by the International Monetary Fund. According to the IMF, the region is expected to experience a 0.5 percent decline in growth, which is a cause for concern. The IMF attributes this contraction to various factors, including a decrease in oil production and a significant decline in tourism, particularly in countries like Egypt and Jordan, where tourism plays a crucial role in their economies.

Furthermore, the disruptive impact of Iran-backed Houthi attacks on shipping is exacerbating the situation. Describing the aggression in the Red Sea as a significant maritime chokehold, Hamaizia highlights that approximately 30 percent of global shipping has been affected. This has resulted in a 43 percent decrease in traffic through the Suez Canal and a 60 percent increase in traffic around the Cape of Good Hope, a longer and considerably more expensive route.[57]

See also

References

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  2. ^ "Hostilities in the Gaza Strip and Israel – Reported Impact" (PDF). United Nations Office for the Coordination of Humanitarian Affairs. November 9, 2023. Retrieved November 17, 2023.
  3. ^ Jadou, Monjed. "Palestinian industries falter as Israel bombs Gaza, locks down West Bank". Al Jazeera. Retrieved 21 January 2024.
  4. ^ "Gaza economy shrank by more than 80% in 4th quarter due to conflict: World Bank". France24. Retrieved 23 February 2024.
  5. ^ "Israel-Gaza war 'devastating' Palestine economy, UN warns". Al Jazeera.
  6. ^ "Gaza loses 61 percent of jobs in Israeli war: UN". AhlulBayt News Agency.
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  10. ^ "War is costing economy some $600m a week due to work absence — Bank of Israel". Times of Israel.
  11. ^ Wrobel, Sharon (9 November 2023). "War is costing economy some $600m a week due to work absence — Bank of Israel". The Times of Israel.
  12. ^ The daily cost of the Gaza war is 246 million dollars for Israel Retrieved 4 December 2023
  13. ^ "War with Hamas to cost Israel above $50 billion, Calcalist reports". Reuters.
  14. ^ From the Ashes of Hamas-Israel War, Can Economics Drive Peace? Retrieved 16 December 2023
  15. ^ "Israel recruits from India, Sri Lanka to replace Palestinian workers". Al Jazeera. Retrieved 22 January 2024.
  16. ^ https://www.ft.com/content/763bb384-a974-4222-996f-8aecfbc32074
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  18. ^ Israel's economic output plummeted in the final three months of 2023, mainly driven by a large drop in private consumption. Retrieved 28 February 2024
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  20. ^ Economic fallout of Israel’s Gaza Strip operation threatens growth prospects Retrieved 28 February 2024
  21. ^ a b Zomer, Navit (2023-12-25). "Israeli high-tech factories have difficulties importing components from China". Ynetnews. Retrieved 2024-01-18. The Chinese are imposing a kind of sanction on us. They don't officially declare it, but they are delaying shipments to Israel," a senior figure in one of the factories told Ynet. "They have various excuses and pretexts, such as requiring suppliers from China to obtain export licenses to Israel that did not exist before. Additionally, they demand that we fill out numerous forms, causing significant delays. This has never happened to us before.
  22. ^ "Hebrew Newspaper: China imposes sanctions on "Israel" against the backdrop of the war in Gaza". Al-Quds. 25 December 2023.
  23. ^ "China delays shipments to Israel amid Gaza genocide; over 20,000 Palestinians killed so far". Free Press Kashmir. 25 December 2023. Chinese actions are seen as a de facto sanction, as shipments are delayed under various pretexts, such as new export licenses and extensive paperwork demands, impacting the timely production of electronic products.
  24. ^ "Wider War in Middle East Could Tip the World Economy Into Recession". Bloomberg. October 12, 2023 – via www.bloomberg.com.
  25. ^ Smith, Elliot (November 3, 2023). "Goldman Sachs says the Israel-Hamas war could have major implications for Europe's economy". CNBC.
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  27. ^ Looking at causes, measuring effects of Israel-Hamas war Retrieved 28 February 2024
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  29. ^ "Bahrain expels Israel ambassador and cuts economic ties". Arab News. 2 November 2023.
  30. ^ "Bahrain recalls ambassador from Israel, cuts economic ties over Gaza war: Parliament". gulfnews.com. 2 November 2023.
  31. ^ Egypt's stumbling economy faces new pressures from Gaza crisis Retrieved 12 December 2023
  32. ^ How Israel’s war on Gaza is bleeding Egypt’s economy Retrieved 28 February 2024
  33. ^ Entrepreneurs Association: Hamas-Israel War Will Affect Indonesia's Economy Retrieved 12 December 2023
  34. ^ Israel-Hamas war: What could it mean for India’s economy?
  35. ^ Lebanon, William Christou ــ South (2023-10-21). "In Lebanon, war with Israel threatens the olive harvest". newarab.com/. Retrieved 2023-11-14.
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  37. ^ Alkousaa, Riham (2023-11-02). "Lebanon says fires destroy 40,000 olive trees, blames Israeli shelling". Reuters. Retrieved 2023-11-14.
  38. ^ IIF says Lebanese economy is vulnerable to Hamas-Israel war L'Orient-Le Jour. 1 November 2023 - via today.lorientlejour.com/
  39. ^ Hendawi, Hamza; Oweis, Khaled Yacoub; Homsi, Nada (November 12, 2023). "Disillusion with the West amid Israeli strikes on Gaza fuels Arab boycott of brands". The National.
  40. ^ "Malaysians boycotting McDonalds, Burger King over support to Israel, Palestine responds". WION. 4 November 2023.
  41. ^ "Libya's Fatwa House issues Fatwa to boycott pro-Israel companies". The Libya Observer. 6 November 2023.
  42. ^ "There is a new front in the Israel-Gaza war: The marketplace". The National. 6 November 2023.
  43. ^ "Israel-Gaza war: Indonesian clerics issue fatwa boycotting products linked to Israel and Zionism". South China Morning Post. 10 November 2023.
  44. ^ "Disillusion with the West amid Israeli strikes on Gaza fuels Arab boycott of brands". The National. 12 November 2023.
  45. ^ Mooney, Rory (10 November 2023). "O'Neill's agree to remove Puma items from Derry store". www.derrynow.com. Archived from the original on 13 November 2023.
  46. ^ "The Lowdown: McDonald's and the pro-Palestinian protestors". restaurantonline.co.uk. 3 November 2023. Archived from the original on 19 November 2023.
  47. ^ "Lockheed Martin: Palestine protesters install blockade". BBC News. 25 November 2023.
  48. ^ "Anti-war protesters block access to Lockheed Martin subsidiary in St. Paul". MPR News. 10 November 2023.
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  50. ^ "Hundreds gather for another protest outside of Textron Headquarters". ABC6.com. 17 November 2023.
  51. ^ "Hundreds call on Boeing to stop weapons supply to Israel". Wafa. 9 December 2023.
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  53. ^ "Protesters Are Targeting Defense Contractors That Bragged About Profits from Gaza". Vice. November 17, 2023.
  54. ^ Luck, Flaminia (10 November 2023). "Israel-Gaza: Union members block arms factory in protest over conflict". BBC News. Archived from the original on 10 November 2023.
  55. ^ Simone, Carlo (16 November 2023). "Leonardo UK profile as Southampton factory roof occupied by Palestine Action". Daily Echo.
  56. ^ "Malaysia bans Israel-flagged ships from its ports in response to Gaza war". Al Jazeera. Retrieved 21 December 2023.
  57. ^ Looking at causes, measuring effects of Israel-Hamas war Retrieved 28 February 2024
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