Middle East

Israel’s economy slumps 19.4 percent in the fourth quarter as war takes a toll

By Hanna Ziady, CNN

London CNN  —  Israel’s output contracted sharply in the final three months of 2023, falling for the first time in nearly two years, as the war with Hamas takes a heavy toll on the economy.

Gross domestic product (GDP) plunged 19.4 percent on an annualized basis compared with the July-to-September quarter, when it grew by a revised 1.8 percent, Israel’s Central Bureau of Statistics said Monday in its initial estimate.

The worse-than-expected decline was driven by a 26.9 percent drop in private consumption, as confidence plummeted following the October 7 attacks and households cut back on spending.

Fixed investment by businesses tumbled 67.8 percent, “driven by a near-halt in residential building resulting from military call-ups and a reduction in Palestinian workers,” according to Liam Peach, senior emerging markets economist at Capital Economics. Exports declined 18.3. percent.

“While a recovery looks set to take hold in (the first quarter), GDP growth over 2024 as a whole now looks likely to post one of its weakest rates on record,” Peach said in a note Monday.

Last year, Israel’s economy grew 2 percent, according to the statistics office.

The Israeli shekel weakened slightly after the data release to trade at around 3.62 to the US dollar. But the currency has staged a remarkable recovery since falling in the immediate aftermath of the October attacks, thanks partly to support from the central bank.

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