Gaza War: How the war is hitting Israel’s economy

Gaza War: How the war is hitting Israel’s economy

Deserted beaches, closed shops and deserted office spaces. The war is clearly having an impact on Israel’s economy. German companies are currently operating on sight.

Uniform in the morning, online conferences in the evening: for the former colonel of an Israeli elite unit, Bobi Gilburd, this has been part of everyday life over the past three weeks. “As soon as the service was over, I changed clothes, got in my car in front of the military base and called customers in the US or Europe,” says the 45-year-old, who worked for 26 years in Israel’s elite cyber intelligence unit 8200 . Actually, he now works in the private sector, but returned to the military because of the war against the Islamist Hamas, which rules in the Gaza Strip.

He has been sitting in his office in Tel Aviv for a few days now. He doesn’t know how long. Ten percent of his high-tech company’s employees are among the more than 300,000 reservists called up in the country. “We can’t afford to stop working,” Gilburd says. Many of his colleagues work from the front using their cell phones or laptops. Since the war began on October 7th, every deadline has been met. Most conversations now take place online, often in the evening. “But the customers are very understanding; they know we are at war here.” This also applies to missile alarms. “Countless meetings were interrupted, but that’s just how it is,” says Gilburd.

Maintaining productivity is extremely important. His company works in the field of cybersecurity. “The industry is developing so quickly that we can’t say we’ll be gone and back in a few months.”

Driving force of the economy: tech industry affected

The start-up and high-tech industry in the country of ten million inhabitants is considered the driving force of the Israeli economy. Last year, according to the Israel Innovation Authority, it accounted for more than 18 percent of gross domestic product and around 50 percent of exports.

Many young people are employed there in particular and have now been moved to the front, says Andrea Frahm, representative of the Federal Association of Medium-Sized Businesses (BVMW) in Tel Aviv. The war also had direct consequences on sectors such as tourism and trade, where there was sometimes short-time work.

According to the Israeli statistics office, more than half of the companies in the country are complaining about heavy losses. Farms and construction sites are completely at a standstill, especially in the border area, says Eran Yashiv, an economist at Tel Aviv University. Around a quarter of a million Israelis have left their homes because of the war. Half of them are participating in government-funded evacuation programs. Added to this are the costs of rebuilding destroyed cities.

Tourism also largely came to a standstill since the beginning of the war. Empty beaches in Tel Aviv and a deserted Old City in Jerusalem show the extent. Hardly any airlines fly to Israel anymore. The few travelers who land at Ben Gurion Airport near Tel Aviv report empty terminals. The Israeli shekel has hit its lowest level against the dollar in more than 20 years. The US bank JPMorgan estimates that Israel’s economic output could shrink by 11 percent year-on-year this quarter.

According to economist Yashiv, it is still too early to make predictions. “Everything depends on the further course of the war.” The consequences for Israel’s economy could be more severe than in previous wars. The decisive factor is whether other fronts become more intense, such as with the Lebanese Hezbollah militia, or whether Iran becomes even more directly involved.

Direct effects on German companies

The war also affects German companies that are active in Israel. “Some are taking a cautious approach and waiting to make planned investments,” says BVMW representative Frahm. “Many expats have left and are working from Germany for the time being.” However, Frahm is not observing that companies are now giving up their businesses in Israel on a large scale. There are close connections between Israel and Germany’s medium-sized businesses, particularly in the high-tech industry. “We are now working on rescheduling or indefinitely postponing conferences and event formats between high-tech and industrial companies planned in the next few months.”

Germany and Israel have close economic relations – even though Israel is a relatively small trading partner of the Federal Republic. According to the Bundesbank, 103 German companies have branches and around 10,000 employees in Israel.

Because of the war, there are already precautionary measures in Germany. The Bonn Federal Institute for Drugs and Medical Devices is analyzing the risk of possible delivery failures from Israel. There are currently “potentially limiting circumstances” for eight active ingredients, which are now being examined separately. The Israeli pharmaceutical company Teva states that production is “still largely unaffected”. The company, which is considered the world leader in copycat medicines and is represented in Germany by Ratiopharm, has “emergency plans with backup production sites in place.”

Optimism despite war

The President of Israel’s Central Bank, Amir Yaron, expressed optimism despite everything: “The Israeli economy is robust and stable.” People used to know how to recover from difficult times and quickly return to prosperity. “I have no doubt that this will be the case this time too.”

Colonel Bobi Gilburd is also convinced of this. He observes a lot of creativity. “Soldiers from the front call me and say they have this or that new idea.” He was sure that one or two of them would lead to new companies after the war.

Source: Stern

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