Conflict in Gaza to Hurt Economy in Israel, but Not Break It

The war Israel is waging against the Palestinian militants on the Gaza Strip likely will cost tens of billions of dollars, hurt the economic growth temporarily and put pressure on the finances of the government.

Officials and analysts compare the operation currently taking place to the war of one month between Israel and guerrillas from Hezbollah during 2006, along with the conflicts in 2009 and 2012 in the Gaza strip, when the Israeli economy was hit hard but was able to recover quickly, except in its tourism sector.

The Central Bank of Israel believes the fighting provided it stays inside Gaza, might knock at the most a half a percentage point from the economic growth for the year.

One analyst said the war would be costly to the economy, but nothing bordering on disastrous.

The damage can be controlled, but only with a strong economic policy.

The analyst added that Israel could not be complacent that the recovery will just be automatic because foreign investors could start balking at investing in a place subject to rocket fire.

Over three weeks ago, Israel started its offensive in the Gaza Strip, which is controlled by Hamas. Air strikes started the offensive but it has become a ground war that Benjamin Netanyahu, the Prime Minister of Israel, has said could take time to complete.

Bank of Israel lowered its benchmark rate of interest to just 0.5% Monday, a drop of 0.25%, in part to offset the damage in the economy due to the conflict.

The Bank said it is too early to put a gauge on the effect in the economy of the latest Israeli conflict, but events that have been similar over the last decade like the Lebanon war of 2006 had just a moderate impact at the macroeconomic level.

Security alerts for rocket attacks as well as frequent sirens for air raids have disrupted the business activity and caused consumer spending and industrial output to fall.

The daily newspaper Yedioth Ahronoth in Israel estimated the military operation thus far has cost over 12 billion shekels, which is 1.2% of the entire economic output.

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