Israel’s Central Bank Estimates Conflict Cost at $53 Billion
Israel’s Central Bank released a forecast on Monday, estimating the cost of the ongoing conflict with Hamas at approximately 197 billion shekels (around $53 billion). This figure includes a wide range of expenses, with defense expenditures accounting for 107 billion shekels. Additionally, the cost of damage compensation is expected to be around 22 billion shekels, and other civilian expenditures are estimated at 25 billion shekels.
The financial impact of the conflict also extends to an anticipated 8 billion shekels in interest on government debt and a significant 35 billion shekel loss in tax revenue. The forecast is based on the assumption that the direct impact of the conflict on Israel’s economy will continue into 2024, though with diminishing intensity over time.
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Consequently, the country’s gross domestic product (GDP) growth is projected to slow down, with an expected growth rate of 2% in both 2023 and 2024. These figures mark a decrease from the previously forecasted growth rates of 2.3% for 2023 and 2.8% for 2024, as reported last month.
The bank’s projection also indicates a rise in the government’s debt relative to the GDP. From 60.5% in 2022, the debt is expected to increase to 63% in 2023 and further to 66% by the end of 2024, primarily due to high conflict-related expenses and a sharp reduction in tax collection.
