Israeli flags hang above produce for sale at Carmel Market in Tel Aviv, Israel, on November 7, 2023.
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Official data shows that Israel’s gross domestic product shrank by nearly 20% in the fourth quarter of 2023.
The contraction was significantly larger than expected, with analysts expecting a contraction of about 10%. It reflects the toll from the country’s war against Hamas in Gaza, which is now entering its fifth month.
Goldman Sachs analysts wrote in a research note that economic data released on Monday “mainly showed a contraction in private sector consumption and a sharp contraction in investment, especially real estate investment.”
“Gross domestic product contracted sharply despite strong growth in public sector consumption, a positive contribution from net trade and a larger fall in imports than in exports.”
Official data showed that private consumption fell by an annualized 26.9% month-on-month, fixed investment plummeted by nearly 68%, and residential construction came to a standstill due to military mobilization and a shortage of Palestinian workers. Since October 7, most people have been banned from entering Israel.
Prior to this, more than 150,000 Palestinian workers entered Israel from the occupied West Bank every day to work in a range of sectors, mainly construction and agriculture.
Liam Peach, senior emerging markets economist at Capital Economics in London, said in an analysis note that Israel’s GDP contraction was “much deeper than expected, underscoring the impact of the Hamas attacks and The extent of the Gaza war’s impact.”
“While the economic recovery appears to be taking hold in the first quarter, overall GDP growth in 2024 now looks likely to post one of its weakest paces on record.”
Israel’s high-tech economy is particularly affected by the fact that the country has mobilized 300,000 male and female reservists in Gaza and along its northern border with Lebanon’s Hezbollah.
The mobilization was triggered by a terrorist attack led by the Palestinian militant group Hamas on October 7 that killed about 1,200 people in Israel. Subsequent Israeli attacks and relentless bombing campaigns in the Gaza Strip have killed more than 28,000 people in the blockaded area, according to the Hamas-controlled Gaza Health Ministry.
