An Israeli national flag above produce for sale at Carmel Market in Tel Aviv, Israel, on Tuesday, Nov. 7, 2023.
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Israel’s gross domestic product shrank by nearly 20% in the fourth quarter of 2023, according to official figures.
The contraction was significantly larger than expected — analysts predicted a contraction of around 10% — and reflects the toll of the country’s war against Hamas in Gaza, now entering its fifth month.
The economic data out Monday “pointed primarily to a contraction in private sector consumption and a deep contraction in investment, especially in real estate,” analysts at Goldman Sachs wrote in a research note.
“The deep GDP contraction occurred despite a strong surge in public sector consumption as well as a positive net trade contribution, with the decline in imports outpacing the decline in exports.”
Official figures showed a 26.9% quarter-on-quarter annualized drop in private consumption, and fixed investment plummeting by nearly 68% as residential construction ground to a halt amid a shortage of both Israel workers due to military mobilization and Palestinian workers as the latter group have been mostly barred from entering Israel since Oct. 7.
Before then, more than 150,000 Palestinian workers from the occupied West Bank entered Israel daily for work in a range of sectors, predominantly in construction and agriculture.
Israel’s GDP contraction “was much worse than had been expected and highlights the extent of the hit from the Hamas attacks and the war in Gaza,” Liam Peach, senior emerging markets economist at London-based Capital Economics, said in an analysis note.
“While a recovery looks set to take hold in Q1, GDP growth over 2024 as a whole now looks likely to post one of its weakest rates on record.”
Israel’s high-tech economy is particularly impacted by the fact that it’s mobilized 300,000 of its men and women as military reservists to deploy in both Gaza and on its northern border with Hezbollah in Lebanon.
The mobilization was triggered by the terror attack of Oct. 7 led by Palestinian militant group Hamas that killed roughly 1,200 people in Israel. Israel’s subsequent offensive against the Gaza strip and relentless bombing campaign has killed more than 28,000 people in the blockaded territory, according to Gaza’s Hamas-run health ministry.