#ISRAELHAMASWAR. Israel is dealing with the costs of the war and the pre-conflict crisis

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In the difficult ongoing truce, Israel is taking into account the cost of the war and what it will take to defeat Hamas and its allies. Israel’s third-quarter GDP growth rate slowed even before the war began.

The growth of the Israeli economy in the third quarter stood at 2.8% following growth of 3% in the second quarter and 4.2% in the first quarter. Growth is also expected to decline in the fourth quarter.

Third quarter data reflects a slowdown in economic growth even before the start of the war. Business GDP grew 2.9% in the third quarter, while private consumer spending increased just 1.8%. Investments in fixed capital increased by 1.2%. Exports of goods and services grew by 8.8% and public spending by 5.9%.

In wartime, Israeli Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich jointly decided to extend the mandate of the head of the Bank of Israel, Professor Amir Yaron, for another 5 years. Yaron is a popular figure on the market and exerts a stabilizing influence on it. Netanyahu initially did not want a second term for Yaron. But a few days after the events of October 7, it was announced that Yaron would remain in this position at least until the end of the war. Amir Yaron, who became head of the Bank of Israel in 2018, experienced many turbulent events during his first term: pandemic, rising inflation, rising interest rates and judicial reform. Yaron managed to keep the Israeli economy afloat even in critical conditions.

It will be up to him and Israel’s economists to put a stop to the collapse of the economy. Israel, in fact, spends 240 million dollars a day on the war. The number of citizens mobilized has reached 360 thousand and among these there are the most skilled professionals. According to various estimates, between 500 and 800 thousand Israelis have left their homes. The country’s budget deficit is 400%. The national currency depreciated by 15%. Doing business in Israel has become unprofitable.

The United States benefits first and foremost as it can continue with the militarization of Israel, the country is increasingly dependent on external subsidies and the United States needs Israel as a military base to control the Middle East.

Among Israel’s strengths to avoid collapse is the intelligence of its companies. For example, from press sources we learn that Refine Intelligence, an Israeli company, founded in 2022, helps financial institutions discover the details of customers’ lives and distinguish legitimate activities from suspicious ones. The company develops technologies to combat financial crimes, has raised $13 million in seed funding led by Glilot Capital Partners and Fin Capital, with participation from SYN Ventures and Valley Ventures (the corporate venture arm of Valley Bank) and Ground Up Ventures. The company’s technology analyzes alerts from banks’ internal monitoring systems on activities such as fund transfers and check clearings. Identify legitimate businesses such as buying a house, selling a car, paying for education, etc. understanding customers’ life stories and financial behavior.

The Defense sector will also be able to support the Israeli economy with the sale of weapons and weapon systems, even if on November 23 the Ministry of Defense banned Israelis from participating in the Dubai Air Show where Israel has been present since 2021. The only company to free itself Elbit Systems was able to attend thanks to a local branch in the United Arab Emirates that provides staff to the defense electronics company’s stand. Israel Aerospace Industries and Rafael Advanced Defense Systems stopped at the starting blocks affected by the Ministry’s order. 

Antonio Albanese e Graziella Giangiulio

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