ECONOMIC CRISIS SMOTHERS ISRAELIS AMID WAR IN GAZA

Fri 14 June 2024:

The Israeli war on Gaza has left the occupation entity struggling with a severe economic crisis, which has now made its way to the settlers themselves with no solutions in sight, Bloomberg said in a report.

After Operation Al-Aqsa Flood in October 2023, tens of thousands of Israelis residing in Gaza’s envelope fled the settlements to farther areas. Directly following the operation, the housing stock plummeted by 5 percent.

Most of the Israelis who fled the area have been living in rented hotel rooms since. Almost nine months into the war, housing leases have skyrocketed. According to the newspaper, citing an Israeli from the Ofakim settlement, the rent increase surpassed a quarter of the monthly consumer basket prices in the entity.

The “inflationary chain reaction” of the worst war Israel has witnessed in almost five decades is now “coming into view”, Bloomberg said.

The initial “shock to consumer spending” was huge to the extent it effectively kept inflation from spiraling despite economic disruptions. Yet, with domestic demand on the rise, prices for various goods and services are now rapidly climbing.

The Israeli central bank had intentions to ease monetary policy further. However, due to the worsening economic outlook (which could include factors like slower growth, higher unemployment, or increased inflation), the central bank was forced to reconsider its plans. This would mean that borrowing costs may remain elevated for a longer period as the government looks for finances by issuing bonds.

As unemployment rates return to levels similar to those before the pandemic, and with an approximate 8 percent increase in wages in the first two months of 2024, among other pressing factors, such as higher taxes and a volatile currency, inflation will be much harder to tame.

Meanwhile, the Israeli Finance Ministry forecasts that inflation will be 3.3 percent at year’s end, with housing, food, and transportation being the major contributors.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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