Gaza and Israel – the economies after the war

Call it a war or an operation. Support whichever side you want. What cannot be denied is that the lives of hundreds of thousands of people on both sides of the Gaza-Israel divide have been shattered.

In Gaza, one estimate is that barely 100,000 people had employment with a regular salary. As most of that was in the government sector, the number could be about to drop sharply. Today, whole neighbourhoods are deserted.  700 hundred have died to date and around 5,000 are wounded. (To give that some perspective, approximately half those numbers are assumed to be men in arms. And in Syria, this week,  700 were slaughtered in two days.)

France, the USA, the UK, the UAE and others have all promised initial aid for Gaza. However, something more substantial will be needed.

Over in Israel, the international press cannot (thankfully) report such casualty figures. And yet, for years around 1.5 million people in the south of the country have lived in daily fear of their lives from Kassam rockets. Understandably, yet again, many have fled northwards this July. Reports from the retail sector and other businesses in these districts report a 30% drop in revenues. Tourism across the country is also down by around 30%. At least four significant offerings planned by Israeli companies on the USA stock markets have been postponed. And now that 50,000 reservists have been called up, small businesses are bound to suffer.

There are some bright spots. The Israeli shekel has actually improved its position against other leading currencies. The Tel Aviv Stock Exchange has hauled back the sharp losses felt at the start of the battles. The Bank of Israel has described the economy overall as “resilient“.

In Gaza, there is not too much hope. The Hamas economy was dependent to the tune of billions on smuggling tunnels, which Egypt had blocked months ago. Daily aid still comes through from Israel. The private wealth and homes of Khaled Mishaal, Haniyeh and other leaders has not been obviously touched, while the average citizen has to wait for a new dawn.

Moving forward, historically Israel’s economy has tended to emerge from wars in an improved position. Simply put, the pick up afterwards helps to generate a mini boom. And the IMF deputy spokesman William Murray explained how he expects this phenomenon to continue: “However, we need to make clear that once the conflict ends, we expect growth in Israel to rebound relatively quickly”.

Meanwhile, the Hamas has already made it perfectly clear that it expects to be bailed out by the international community. In a fascinating comparison, CNBC financial news summarized that:

Just since 2001, Israel’s GDP has grown 1,000 percent and its economy is now larger than Egypt’s economy despite the fact that Egypt has 10 times Israel’s population. At the same time, the Palestinian Authority and Hamas have received billions of dollars in foreign aid and support. But instead of joining in Israel’s modern economic boom and encouraging partnerships, the political leaders have clearly invested in rocket launchers and terror tunnels instead.

Where to now, especially for Gaza? They cannot blame the so-called Israeli blockade, because goods come through, yet not from Egypt. They cannot complain about the density of the population, because places like Singapore have shown how this can be turned to an advantage.

I was struck by three developments this week, which possibly indicate how the respective governments will seek to look after their peoples after the guns have stopped firing. As noted by the Ma’an news agency, the Israeli army set up a field hospital in Gaza to treat the wounded. Further north in Jerusalem, a brand new centre was opened to treat people with Alzheimer’s, whatever their ethnic background. Third, no such equivalent initiatives could be found from the leaders of Gaza.

About the Author
Michael Horesh is a recognised business coach and mentor, and has helped clients collectively to create millions in added value over the past decade. He has substantial understanding of the workings of the Israeli economy and the financial situation of the Palestinians, as well as an incisive way of looking at Middle East issues.
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