How is the war in Gaza affecting the Israeli economy?

Former CEO of the Central Bank of Israel , Leumi Rakefet Rusak Aminoax, spoke about how the war in the Gaza Strip is damaging the Israeli economy.

"The war has already cost the Israeli economy more than 250 billion shekels ($67.3 billion), and the defense ministry wants at least 20 billion shekels ($5.39 billion) to be spent every year," Aminoa x told Israel's Channel 12.

"The distribution is huge, we have evacuees, wounded and many economic needs that are not even included in the cost of war," he added.

Former head of the Bank of Israel Yaakov Frenkel said that the country's budget deficit reached 8.1% in July and noted that fighting the deficit is the most urgent and important task.

"Israel started 2023 without a deficit and since then the situation has worsened. By the end of July, the deficit had reached 8.1 percent, or about 155 billion shekels ($41.8 billion). It should be covered, " he said.

Former CEO of Discount Bank, Uri Levin, for his part, noted that Israel cannot restore its economy without regaining the confidence of international investors.

Earlier, Fitch Ratings x alqaro rating agency lowered Israel's long-term foreign currency default rating from A+ to A. The downgrade is said to reflect "the impact of the ongoing war in Gaza, heightened geopolitical risks and military operations on multiple fronts."

"In addition to the human cost, this [Gaza war] could result in significant additional military costs, infrastructure destruction and long-term damage to economic activity and investment, which could further worsen Israel's credit profile," Fitch Ratings said in a report.

"Public finances have suffered and we are forecasting a budget deficit of 7.8 percent of GDP in 2024, with debt above 70 percent of GDP in the medium term. In addition, the World Bank's management indicators may deteriorate, which will affect Israel's creditworthiness," the agency said in a statement.

Fitch forecasts that the debt-to-GDP ratio will rise to 72 percent in 2025, up from 71 percent in 2020 during the coronavirus pandemic.

Fitch is the latest of three rating agencies to downgrade Israel's credit rating since the start of Israel's attacks on the Gaza Strip. Thus, Moody's lowered the country's credit rating from A1 to A2, and Standard & Poor's lowered it from AA- to A+.