The Israeli flag rests on agricultural products for sale at Carmel Market in Tel Aviv, Israel, November 7, 2023.
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Israel's gross domestic product shrank by nearly 20% in the fourth quarter of 2023, according to official statistics.
The contraction was significantly higher than expected, as analysts had expected a contraction of around 10%. This reflects the toll of the country's war against Hamas in Gaza, now in its fifth month.
Analysts at Goldman Sachs said in a research note that economic data released on Monday “points to a contraction in consumption, primarily in the private sector, and a significant contraction in investment, particularly in real estate.” .
“Despite a significant surge in public sector consumption and a positive contribution from net trade, a significant GDP contraction occurred, with the decline in imports outpacing the decline in exports.”
According to official figures, private consumption fell by 26.9% quarter-on-quarter, and fixed investment plummeted by nearly 68% as housing construction halted amid a shortage of Israeli and Palestinian workers due to military mobilization. Since October 7, most people are prohibited from entering Israel.
Previously, more than 150,000 Palestinian workers from the occupied West Bank entered Israel every day to work in various sectors, mainly construction and agriculture.
Liam Pietsch, senior emerging markets economist at London-based Capital Economics, said in an analytical note that Israel's GDP contraction was “much worse than expected, underscoring the scale of the damage from the Hamas attack and the war in Gaza.” “I am doing so,” he said.
“While the recovery is likely to take hold in the first quarter, overall GDP growth in 2024 is now likely to be at its lowest level on record.”
Israel's high-tech economy is particularly affected by the fact that it mobilizes 300,000 men and women in reservists both in Gaza and on its northern border with Hezbollah in Lebanon.
The mobilization was prompted by a terrorist attack led by the Palestinian militant group Hamas that killed around 1,200 people in Israel on October 7. The ensuing Israeli offensive and relentless bombing of the Gaza Strip has left more than 28,000 people dead in the blockaded area, according to the Hamas-run Gaza Health Ministry.
