This content is not available in your region

Huge economic cost from Gaza conflict

Huge economic cost from Gaza conflict
Text size Aa Aa

The economic cost of the Gaza fighting is being counted by both Israel and the Palestinians.

Israel saw tourists frightened away, consumer spending slowed as people stayed indoors and manufacturing fell.

The central bank has estimated the conflict will knock half a percent off Israel’s economic growth this year and has cut interest rates to try to compensate.

Some economists say the country may even slip into recession.

Places like Bethlehem – which is not in Gaza but in the West Bank – have also experienced a fall in visitors and the tourism industry is vital to the Palestinian economy.

Tourism Minister Rulah Ma’ayah lamented: “We had many cancelations during this month – the month of August, and last month, in July. We had a decrease in the number of tourists arriving to Palestine, and the decrease was up to 60 to 65 percent.”

In Gaza itself the authorities calculate the cost of rebuilding will be as much as six billion euros.

The Palestinian Center for Human Rights said 540,000 people had been displaced in the Gaza Strip with tens of thousands of home destroyed of damaged.

For now things are calm, the ceasefire agreement even bringing potential benefits for a few with a widening of Gaza’s fishing zone in the Mediterranean.

But the credit rating agency Fitch has expressed concern that the Gaza war reinforces the risk of Israel being drawn into repeated costly conflicts, driving up defence spending, blowing out the budget and raising red flags over the sustainability of government finances.

Paul Gamble, the director of sovereign ratings at Fitch, said: “One of the things we are thinking about is the longer-term impact on defence spending”

He recently cautioned in a report that Israel’s budget deficit was likely to be missed, largely because spending on defence will not now be trimmed.

“We don’t know if there’s going to be a new status quo that’s sustainable. From the point of view of international investors, you have to ask if … you are going to see a conflict of this kind of magnitude every few years?”