As the Israel-Hamas conflict continues into its 11th month, both Israeli and Gaza economies are facing significant challenges, leading to widespread public unrest and humanitarian crises. Histadrut chairman Arnon Bar-David has announced plans to 'halt' Israel's economy starting September 2, 2024, amid protests demanding a ceasefire in Gaza [88f3db8d]. This unrest follows the devastating attack by Hamas on October 7, 2023, which resulted in the deaths of 1,200 Israelis and the abduction of 250 hostages [88f3db8d]. The ongoing conflict has claimed over 40,000 Palestinian lives, raising urgent humanitarian concerns [88f3db8d].
Recent economic data reveals that Israel's GDP growth was only 1.2% in the second quarter of 2024, significantly below the expected 4.4% [8c76b116]. Concurrently, GDP per capita has contracted by 0.4%, and inflation has risen to 3.2%, indicating mounting economic strain due to the protracted conflict [039d878f]. The Bank of Israel has revised its growth forecast down to 1.5% for the year, contingent on the cessation of hostilities [8c76b116].
In Gaza, the economic situation is dire, with the economy shrinking to less than a sixth of its pre-war size due to Israel's military campaign that began nearly a year ago [a789ff68]. Unemployment in the West Bank has nearly tripled, exacerbating the humanitarian crisis [a789ff68]. A UNCTAD report highlights Gaza's economy as 'in ruins' more than 11 months post-conflict, calling for immediate international intervention to address the economic decline and humanitarian needs [a789ff68].
The war has led to the closure of approximately 46,000 businesses in Israel since its onset, with small enterprises bearing the brunt of the impact—75% of the closures involved small businesses [44e6560a]. Exports have decreased by 8.3%, and Israeli ports have seen a 16% decline in shipping activity during the first half of 2024 [44e6560a]. Additionally, tourism revenue has plummeted from $1.4 billion in the third quarter of 2023 to just $464 million [f12af525].
Protests in Tel Aviv have drawn tens of thousands of participants, many of whom are questioning the political effectiveness of the planned strike [88f3db8d]. Prime Minister Benjamin Netanyahu has attributed the stalled negotiations regarding a ceasefire to Hamas, while U.S. officials, including President Biden and Secretary of State Blinken, have been involved in discussions aimed at reaching a resolution [88f3db8d].
The Palestinian Authority is under immense pressure, with over $1.4 billion withheld by Israel since 2019, and Finance Minister Bezalel Smotrich has accused the PA of supporting violence, claims that the PA denies [a789ff68]. Historically, Israel has faced economic crises before, such as in 1984 when inflation soared to 373%. The implementation of the 'Economic Stabilisation Plan' by then-Prime Minister Shimon Peres successfully curbed inflation and boosted GDP per capita, a model that some analysts suggest may be necessary again in the current climate [039d878f].