Israel-Hamas War 2023/ screenshot
JPMorgan Chase lowered Israel’s 2023 fourth quarter GDP forecast, reporting that it now expects the country’s economy to contract during that period by 11%. The bank previously predicted a contraction of just 1.5%.
The obvious reason for this is the “Iron Swords” War Israel is currently fighting against the terrorist group Hamas in Gaza. That war started with a surprise attack by Hamas on October 7 in which the group murdered more than 1,000 innocent people including entire families.
The country is losing a fortune from a lack of tourism and a drop in productivity. Farms all over the south and north of the country are having trouble making their harvests as the locals have been evacuated and the areas are being bombed on a regular basis. This hurts the economy overall, and more specifically Israel’s exports.
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And several hundred thousand IDF reservists have been called up. This puts a further strain on Israel’s economy as these people are not available for their regular jobs and the government must reimburse them for lost wages.
In the few weeks after the attack the Shekels dropped by 6% in value against the US Dollar and is now trading below the four to the Dollar mark for the first time in eight years.
“Gauging the impact of the war on Israel’s economy remains difficult both due to still very high uncertainty about the scale and duration of the conflict and the lack of high-frequency data at hand,” said JPMorgan in a research note cited by Reuters.
This news came just a few days after Moody’s Investors Service (Moody’s) – the internationally renowned credit ratings agency –placed the Government of Israel’s A1 long-term foreign-currency and local-currency issuer ratings on review for downgrade. This was a direct result of the war going on in Gaza.
Moody’s also placed on review for downgrading Israel’s A1 foreign-currency and local-currency senior unsecured ratings and its (P)A1 foreign-currency senior unsecured shelf and senior unsecured MTN program ratings.
And that decision by Moody’s came just days after another international credit ratings agency, Fitch, placed Israel’s A+ long-term foreign and local currency Issuer Default Ratings (IDR) on Rating Watch Negative (RWN), which means the firm is warning investors to be prepared for the possibility of trouble ahead for Israel.
Fitch also placed the short term foreign and local currency IDRs of F1+ and the issue ratings of A+ on Israel’s long term foreign currency senior unsecured bonds have also been placed on RWN.
And Israel is not the only nation that stands to lose a great deal for every day that the war in Gaza continues. Financial observers expect a prolonged conflict to cost world economies trillions.
