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Israel's Wartime Economic Resilience

(Jewish Chronicle-UK) Alex Brummer - Predictions that the Oct. 7 attacks and the war in Gaza would have a devastating impact on Israel's economy have, thus far, proved wide of the mark. No economy could be unaffected by the budgetary costs of prosecuting a long war. The call-up of 350,000 reservists, many working in key sectors such as technology, is a heavy blow that is having an impact on economic growth. Nevertheless, the national unity of purpose serves to limit the consequences of war. The shekel has bounced back strongly and is now worth 3% more against the dollar than on Oct. 7. Blessed with strong foreign exchange reserves, the Bank of Israel was able to make a large-scale intervention in the foreign exchange markets. Recent attacks by Houthi rebels on shipping in the Red Sea are disruptive, with British oil giant BP and the container behemoth Maersk re-routing sailings. But the impact has so far been limited after a show of U.S. and British naval power. As investment banker Goldman Sachs notes: "Israel's economic and financial vulnerabilities are much lower today than compared to other major episodes of escalating violence." Past prudence in managing Israel's economy means that stability is not threatened. A rapid recovery of lost wartime output - once the guns are silenced - is eminently possible.
2024-01-09 00:00:00
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