Businesses "take a hit", the economy will have a serious recession

On November 1, the Israeli Central Bureau of Statistics said that about 51% of businesses in the country recorded a decrease in revenue of more than 50% due to the Hamas-Israel conflict.

The Hamas-Israel conflict has severely affected more than 50% of Israeli businesses. Image of a construction site in Israel in October. (Source: Le Monde)

To come up with the above results, the Israeli Central Bureau of Statistics surveyed about 1,680 companies with more than 5 employees, representing 68,495 businesses in the country.

Survey results show that 57% of small businesses, with 5-10 employees, have recorded "serious damage", while the figure for large businesses with more than 250 employees is only 14%.

More than 70% of businesses operating in the construction, food and beverage sectors recorded serious losses in revenue.

Meanwhile, about 37% of businesses said that more than 80% of their employees did not go to work, causing "business operations to completely stop".

More than 62% of businesses operating in the construction sector had to temporarily close or close down, while only 4% of companies operating in the financial services and technology sectors fell into a similar situation.

Additionally, 42% of small businesses said they were at risk of closing due to a lack of workers, compared with about 15% of large businesses.

According to the Israeli Central Bureau of Statistics, the main factors affecting Israeli businesses are labor shortages, reduced demand for products and services, security restrictions, school closures, as well as difficulties in supply and transportation.

Sputnik also found that the escalation of conflict in the Middle East threatens the Israeli economy with a severe recession, with an estimated 4% drop in Gross Domestic Product (GDP) in 2023 compared to the $473 billion achieved last year.

Moreover, Israel faces the loss of foreign investors and capital outflows from its economy, as well as even faster price increases.

“Depending on the development of events, the current conflict could have very serious economic consequences for Israel. According to our estimates, Israel’s GDP could fall by 1-4%,” said Khoja Kava, a senior lecturer at the Department of Economic Theory at the Plekhanov Russian University of Economics.

In addition, one of the major economic consequences of the conflict for Israel will be a decline in tourism revenue, which brought the country $5.5 billion last year. The hotel, restaurant and transport sectors will be hardest hit. At the same time, military action could increase the national unemployment rate.

Another consequence of the conflict for the Middle Eastern country is rising inflation. According to Pavel Shashkov of the analytical center Yakov et al., Israel's annual inflation was at its highest level in years before the conflict broke out, and the current tensions could trigger an acceleration of inflation.

However, if the conflict does not spread further, its impact on inflation “will be insignificant for both Israel and its neighbors,” Mr. Shashkov said.

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