Israel's economic growth has suffered a significant setback due to the recent conflict with Hamas in Gaza. Official data reveals a contraction far beyond initial expectations.
A combination of factors contributed to the economic decline:
* Consumer spending plummeted by 26.3%, reflecting a decline in economic activity.
* Exports fell by 18.3%, highlighting the impact on international trade.
* Investment in fixed assets, particularly residential buildings, experienced a sharp 67.8% decrease. The construction sector faced labor shortages from military call-ups and reduced Palestinian workforce.
Liam Peach, an economist at Capital Economics, emphasized the severity of the economic contraction, stating that it exceeded expectations and underscored the consequences of the Hamas attacks and the ensuing military campaign in Gaza.
The conflict has also impacted trade in the Red Sea region. Houthi rebels targeted cargo ships bound for the Suez Canal, disrupting one of the world's crucial maritime routes. The Houthis claimed to target Israeli-linked vessels, but many ship owners denied any affiliation with Israel. Nonetheless, the conflict led to increased shipping costs and disruptions for global trade.