"This is a very high number that encompasses many sectors. About 77 percent of the businesses that have closed since the beginning of the war, roughly 35,000, are small businesses with up to five employees, and are the most vulnerable in the economy," said Yoel Amir, CEO of CofaceBdi, an Israeli information services and credit risk management firm to Maariv. (Related: Israel's DEBT has doubled to nearly $43 billion since declaring war on Gaza.)
The report highlights the most affected industries, with the construction sector and its related ecosystem, including ceramics, air conditioning, aluminum and building materials, experiencing significant damage according to CofaceBdi's risk ratings.
The trade sector, including services and industries such as fashion, furniture, housewares, entertainment, transport and tourism, has also been severely impacted. The report notes that "there is almost no foreign tourism," with business damage prevalent across the country, affecting almost every sector.
The agriculture sector has also been hit hard, with the most affected being those that operate to Israel's north and south, where active combat zones due to threats from Palestinian resistance and Lebanon's Hezbollah have affected operations. These regions' instability has further contributed to the economic downturn.
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Amir estimates that by the end of 2024, 60,000 Israeli businesses could be shut down.
Hezbollah's attacks have severely disrupted local business and education in the north, forcing tens of thousands of settlers to evacuate. "Our goal of draining the enemy's economy has been achieved," Hezbollah leader Hassan Nasrallah stated on July 10.
Additionally, the Yemeni army’s maritime operations have contributed to the economic decline, significantly reducing revenues at key ports like Eilat in the south.
Israeli economy shrinking due to war
In the final months of 2023, Israel's GDP plummeted by nearly 20 percent. The threat of escalation with Hezbollah raises concerns that any full-scale war with the Lebanese resistance could plunge the economy even deeper into crisis. Recent video warnings from Hezbollah demonstrate their capability to target critical energy infrastructure, including oil refineries and gas tanks.
Data released back in February showed that Israelis sharply curtailed spending, travel and investment at the end of 2023 as Israel's all-out war on Hamas militants in Gaza took a heavy toll on the economy.
The war halted economic growth, particularly with a massive call-up of reserves and tens of thousands displaced from border towns near Gaza and Lebanon due to constant rocket attacks from Hamas and Hezbollah.
According to an initial estimate of gross domestic product from the Israel Central Bureau of Statistics, the $500 billion economy contracted by an annualized rate of 19.4 percent in the fourth quarter from the prior three months. This contraction was double the rate expected in a Reuters consensus.
Despite the severe impact in the fourth quarter, 2023 as a whole ended with positive growth.
"The contraction of the economy in the fourth quarter of 2023 was directly affected by the outbreak of the Iron Swords War on Oct. 7," the statistics bureau noted, using the Israeli government's name for the current Israel-Hamas conflict.
For all of 2023, the economy grew by two percent, compared to 6.5 percent in 2022 but above the Organization for Economic Cooperation and Development (OECD) average of 1.7 percent. However, per capita GDP slipped by 0.1 percent last year, compared to an OECD average of 1.2 percent growth.
Until Hamas' Oct. 7 cross-border attack on southern Israel, the economy was on track for growth of about 3.5 percent in 2023. However, October was particularly tough, with the conflict dampening Israeli moods and their desire to participate in the economy. Movie theaters and other entertainment venues were largely closed, though they have since reopened.
Depending on the length of the conflict and whether it expands to other fronts, the economy is expected to grow by as much as two percent in 2024. The central bank and other experts expect a sharp economic rebound in 2025, based on the view that Israel's economy is fundamentally sound, led by the high-tech sector, and has shown resilience after prior conflicts.
Watch this short clip of a group of demonstrators in Tel Aviv lighting a fire in protest of the Israeli government's policies.
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