ALBAWABA - Israel incurred significant financial losses during one month of the Gaza war, with the country's cash reserves decreasing and the Israeli budget deficit rising due to increased spending on war financing. The economy came under negative scrutiny from credit agencies.
Despite Israel injecting funds to assist its currency and economy and avoid economic losses due to the war, Israeli data indicates a clear impact on its overall financial health. Israel's foreign exchange reserves plummeted by over seven billion dollars at the end of October compared to the previous month.
According to the Israeli Central Bank data, Israel's foreign exchange reserves were $191.2 billion at the end of October, accounting for 36.8% of the Gross Domestic Product. The Central Bank attributed the decline to the bank's foreign exchange sales during the previous month, amounting to about $8.2 billion, along with the reevaluation of its currency as the shekel depreciated against the dollar. The Central Bank expected a more substantial decline in foreign exchange reserves, but it partially compensated for it through government transfers from abroad totalling around $2.4 billion.
Israel's budget deficit worsened in a month, rising to 22.9 billion shekels (six billion dollars) compared to a deficit of 4.6 billion shekels (1.2 billion dollars) in the previous September, according to data from the Israeli Ministry of Finance. The deficit as a percentage of the GDP increased to 2.6% in the 12 months until October, up from 1.5% in September.
The Ministry reported a 15.2% decline in Israeli budget revenues last month due to tax deferrals and a decrease in social security income resulting from the war.
The Gaza war led to the mobilization of around 350,000 Israeli reserve soldiers, representing about 8% of the country's workforce, resulting in a halt to their work in various sectors.
A study by the Central Bureau of Statistics revealed that one in three companies closed doors, while more than half reported revenue losses of 50% or more. The situation was worse in southern Israel, the region closest to Gaza, where about two-thirds of companies either closed or minimized operations.
The Israeli economic newspaper, Calcalist, estimated that the war could cost the Israeli economy up to 200 billion shekels (around 51 billion dollars). Due to the Gaza war, Fitch placed Israel's credit rating under negative watch, citing the growing risk of the current conflict with Hamas, while Standard & Poor's revised its future outlook for Israel's credit rating from stable to negative.
