War With Hamas Hits Israel's Economy, Central Bank Says

The debt and deficit are expected to jump as the country raises military spending and increases support for businesses and civilians.

War With Hamas Hits Israel's Economy, Central Bank Says

The war between Israel & Hamas will suddenly slow down the

Israeli Economy

Bank of Israel reported on Monday that the increase in spending for the support of the military, civilians, and businesses will cause the budget deficit to soar this year and the next, as the nation ramps up its expenditures.

Businesses have ceased operations, hundreds of thousands Israeli reservists now are on active duty and many people are sheltering. If the war continues on Israel's southern border, economic growth is expected to slow down from a 3 percent pace in both years predicted in


The bank

In a report

After its first monetary conference since the outbreak of conflict.

Amir Yaron said at a press conference in Jerusalem that he had no doubts about the fact that the Bank of Israel governor would be able to recover from difficult situations. He added that, even so, "it is clear" that a shorter duration or a longer one, as well any expansion of the war into additional arenas would create uncertainty for the economy.

The conflict has dealt an additional blow to the resilient economy

It was a country that, until recently, had been considered a powerhouse of entrepreneurship. Israel had a low debt level, a surplus in its current account, and high reserves of foreign currency. However, the growth rate had slowed due to high interest rates, inflation, and fears that global economic slowdown was imminent.

The bank's report stated that Israel's financial market was functioning and that the majority of economic activity in the country continued 'as normal'.

The shekel, Israel’s currency, had been in a downward spiral since the beginning of the year. But since the war began, it has fallen even more, reaching a low not seen for eight years. This prompted the central bank, the Bank of Israel, to allocate $30 billion to the support the currency. The shekel lost 0.1 percent more against the U.S. Dollar on Monday.

Two credit rating agencies

You can also read about the warnings below.

Last week, it was suggested that Israel's debt might be


The length and severity of the conflict will determine the amount. The central bank stated Monday that Israel's financial system "remains robust and stable."

The central bank was faced with a dilemma: Lower interest rates to boost the wartime economy or maintain them high to support the shekel. The bank decided to keep interest rates the same on Monday. It said that it was focusing its policy on'stabilizing markets and reducing uncertainties'.

Israel's debt, as a proportion of its economy, is expected to increase sharply. This will be due to an increase in defense spending that will include what the bank described as financial support "to conduct the warfare in accordance with defined goals."

The central bank said that tax revenues would likely decline due to the economic downturn and the mobilization of people to fight. The bank stated that consumer spending, construction, agriculture, and tourism activities were already down.

The government also pledged to increase spending to help people and businesses. This includes housing those who have been evacuated from conflict zones. Under the direction of the government, banks and credit card companies are offering repayment deferrals as well as other financial assistance to households and businesses.

The government is also creating a fund that will help cover fixed costs, such as employee salaries, for small and medium-sized businesses.

The bank stated that all of this was expected to keep the Israeli economy in a stable state. The bank added that 'the outlook is still accompanied by a high level of uncertainty'.