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This page is the English version of Almasirah Media Network website and it focuses on delivering all leading News and developments in Yemen, the Middle East and the world. In the eara of misinformation imposed by the main stream media in the Middle East and abroad, Almasirah Media Network strives towards promoting knowledge, principle values and justice, among all societies and cultures in the world

Israel's Economy Faces Severe Strain Amid Prolonged Aggression on Gaza

Middle East: The Israeli entity did not anticipate that the "Al-Aqsa Flood" operation carried out by the Palestinian resistance on October 7 would have such a long-term impact on Israel and its economy, as has been happening since the battle began.

 

The occupation army believed that the invasion of Gaza would be swift and could be completed within at least a month. However, today the battle has reached its tenth month, and the occupation entity is deteriorating significantly and unexpectedly.

According to media reports, Israel's economy shrank by 1.4% in the first quarter of 2024 compared to the same quarter last year. This marks the second consecutive quarterly contraction, following a 21.7% shrinkage in the last quarter of 2023, which coincided with the outbreak of the war on Gaza. The per capita GDP decreased by 3.1% year-on-year.

Expanding Deficit

The additional burdens on the occupation government were highlighted in a numerical survey by the Israeli Bureau of Statistics. Tel Aviv tried to increase spending in the local market to strengthen its collapsing economy. Reports indicate that public spending in Israel rose to 7.1% in the first quarter of last year, year-on-year, after an unprecedented increase of 86% in the last quarter of 2023, mainly due to war expenditures.

Indicators of Declining Israeli Economy

The Hebrew newspaper Globes reported alarming signs in the occupation government's bond market, with the ten-year bond yield rising above 5% for the first time since 2011. This indicates a decrease in demand for large debt offers from the Ministry of Finance, forcing the entity to pay higher interest rates. The head of market strategy at Israel's Leumi Bank explained that the government's need to raise funds increased, along with the volume of bond issuances by the Ministry of Finance and the expanding deficit.

Gaza War

Bloomberg quoted the entity's central bank governor, Amir Yaron, stating that the cost of the Gaza war would reach 250 billion shekels (about $67 billion) by 2025. He noted that an open check for security spending is not feasible. Israel incurred costs of 60 billion shekels (16 billion dollars) seven months into the war, pushing its budget deficit close to exceeding this year's target. Data published by the Ministry of Finance this month showed that the 12-month continuous fiscal deficit swelled to 7% of GDP in April, putting Israel on track to incur one of its largest budget deficits.

Rising Expenditure Due to the Aggression

These exhausting economic repercussions are no longer hidden from settlers, officials, and the Hebrew media, which avoid revealing the full extent of the Netanyahu government's struggles. According to a report by the Hebrew newspaper Globes, government spending since the beginning of the year reached 249.3 billion shekels (66 billion dollars), a 35% increase compared to the same period last year. The main reason for the increased deficit is heightened defense spending and spending on civilian ministries due to the war.

Tel Aviv Stock Exchange

All this prompted the Knesset's Finance Committee to approve an increase in the defense budget for unspecified defense projects from $23.52 billion to $26.56 billion. The spending cap allowed under the framework law for the next year is 545 billion shekels, but government commitments exceed 600 billion shekels ($162.5 billion). According to the General Accountant of the Israeli Ministry of Finance, the financial deficit continued to widen last May, reaching 7.2% of GDP over the past 12 months, or 137.7 billion shekels (about $37 billion). Since the beginning of the year, the cumulative financial deficit has been about 47.6 billion shekels ($12 billion), with the financial deficit expected to end 2024 at around 8% of GDP.

 

The Jerusalem Post mentioned that the Israeli Ministry of Finance proposed a comprehensive reduction in ministry expenses for next year's budget by 5%, amounting to 3.5 billion shekels ($940.2 million), to counter the increasing expenses due to the ongoing nine-month aggression on Gaza. This proposal is reinforced by the escalating threats on the northern front from all components of the resistance axis. Among the Ministry of Finance's proposals were budget adjustments totaling 50 billion shekels ($13.43 billion), including reducing salaries, cutting coalition party allocations, eliminating unnecessary ministries, and raising the VAT rate from 18% to 19%.

Lower Stock Prices

Since the beginning of this year, stock prices in Israel have been lower compared to last year. The Hebrew newspaper Globes mentioned that with half the year gone, the gap between Tel Aviv and Wall Street has widened. Yotav Kostika, chief investment officer at More Mutual Funds, noted that foreign investors are leaving Israel, which is evident from the numbers. Comparing October, just before the war, with March 2024 figures shows a significant decline in foreign investors' holdings in the local bond market. Until October, these holdings represented about 15% of total Israeli government bond holdings, but today they are less than 9%.

Alex Zabezhinsky, chief economist at Meitav Dash, explained that Israel's risk premiums in international markets are much higher than expected from its credit rating. Recently, Israel's financial deficit inflated to 7.2% of GDP, according to official data, with government spending rising by 10% compared to the same period last year, even when excluding war-related expenses.

#Economic_Crisis #GazaGenocide About 4 days
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This page is the English version of Almasirah Media Network website and it focuses on delivering all leading News and developments in Yemen, the Middle East and the world. In the eara of misinformation imposed by the main stream media in the Middle East and abroad, Almasirah Media Network strives towards promoting knowledge, principle values and justice, among all societies and cultures in the world

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