AP Photo/Ohad Zwigenberg
- Israel's central bank forecasts war with Hamas to cost $53 billion between 2023 and 2025, per the WSJ.
- More than half that amount will be for ramped up defense spending.
- Israel's shekel has surged against the dollar in November.
New estimates from the Israeli central bank forecast the war with Hamas to cost Israel roughly $53 billion between now and 2025, according to a Wall Street Journal report.
More than half of that estimate will go toward ramping up defense spending, and officials anticipate lost tax revenue and higher spending on civilians.
"It is likely that government expenditures will increase due to a permanent increase in security expenditures, and an increase in interest payments due to the public debt level increasing and becoming more expensive," Amir Yaron, the governor of the Bank of Israel said in prepared remarks Monday. "These expenses are expected to be much smaller than the current costs of the fighting. However, as noted, they are significant, as they will continue for a long time."
By the end of 2024, the war will cut into Israel's GDP by 3%, in the Israeli central bank's view, even as policymakers work to stabilize financial markets and its currency.
Israel's shekel has strengthened against the US dollar in November more than any other currency in the world. Thanks to central bank interventions, it's jumped about 9% over the last four weeks against the greenback, after the conflict had previously dragged the currency to an 11-year low.
Meanwhile, Yaron said the unemployment rate is expected to be 4.5% on average in 2024, while inflation year-over-year will hover at 2.4%, on average, in the fourth quarter of 2024.
"As the Israeli economy has known how to recover from difficult periods in the past and to return rapidly to prosperity, I am confident and sure that Israel's economy has all the necessary components to return to its tremendous potential growth," Yaron said.