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In southern Israel, crops are now waiting in the sun, wilting further with every passing minute and shuddering a bit as army vehicles buzz past. The area’s farms have become a vast army staging area, pocked with olive green tents and tanks. Farmhands are nowhere in sight.
In southern Israel, crops are now waiting in the sun, wilting further with every passing minute and shuddering a bit as army vehicles buzz past. The area’s farms have become a vast army staging area, pocked with olive green tents and tanks. Farmhands are nowhere in sight.
On Oct. 7, Hamas rampaged through this region killing more than a thousand people, including foreigners. As many as 7,000 Thai nationals, who make up the largest share of the agricultural workforce, fled Israel after nearly two dozen were abducted and three dozen massacred.
The veritable greenhouse of the nation is now dependent on university volunteers. They have tried to salvage the situation and pick the fruit before it rots, but their efforts have fallen short and the Israeli government has already started to import some items.
Israelis are proud of their technological innovations in agriculture and of their ability to grow in a largely arid region and feed their people. Now it is at the top of the list of sectors that will bear the brunt of a long war with Hamas. Oil and gas, tourism, health care, retail and technology are some of the others.
“Many of my colleagues have left,’’ said Cindy, a care-giver from the Philippines who asked to be identified only by her first name for safety reasons. “We are going, too, if it gets any worse,’’ she told me at a market in Jerusalem.
Many airlines have stopped flying to Israel while the government has asked for activities at a gas field to be halted to minimize the risk of a targeted attack. The Israeli shekel has already plummeted to a 14 year low, the central bank has cut the forecast for economic growth this year from 3 percent to 2.3 percent, and prominent industries are facing disruptions.
Israel entered the war with $200 billion in reserves and $14 billion in aid, mainly for military funding, from the United States. And yet experts say the ongoing conflict will cost the Israeli economy billions more and take much longer to recover than it has in the past. Israeli volunteers at home and abroad are chipping in with extra labor and economic assistance—an admirable gesture but insufficient to make up the economic shortfall.
Michel Strawczynski, an economist at the Hebrew University of Jerusalem and former director of the research department at the Israeli central bank, said the cost of previous two confrontations—the Lebanon war in the summer of 2006 and against Hamas in 2014—cost up to 0.5 percent of the GDP and mainly impacted the tourism sector. But this time, “estimations are for a fall of 3.5 percent to 15 percent in annual terms’’ in the last quarter of this year.
Entire towns have been abandoned and businesses shut down as 250,000 people have been evacuated and forced to seek refuge across hotels in the country or with relatives living elsewhere. Furthermore, the call to 360,000 reservists, who were employed in various jobs in peace time, has stretched companies and made their continuation as profit-making businesses precarious.
“This war will cause additional costs compared to these two (previous) confrontations also because of a massive participation of reservists, who are inserted in the labor market in normal times but will be absent from their jobs during the war,’’ Strawczynski said. “If the war is long, the impact of lack of human resources will result on a high cost for the Israeli economy.’’
Tourism, a sector that makes up 3 percent of Israel’s GDP and indirectly provides 6 percent of total jobs, has been dealt a fatal blow, too. The beach in Tel Aviv and cobbled lanes of the old city in Jerusalem, the main tourist attractions, both lie vacant.
It’s peak tourist season, but restaurants and bars in the historical quarters of Jaffa gate served few visitors, mostly journalists. The tourists who throng this part of the world to soak in the sun and bathe in a mix middle eastern and western vibe—enjoying hummus and cocktails in a breezy balmy November—were absent.
The hotels were hosting the internally displaced, with some subsidy from the government but still at a huge loss.
“It’s peak season but there are no tourists,’’ said Mohammad, an Arab Israeli and owner of a candy shop in Tel Aviv who also asked that only his first name be used for safety reasons. “No families, no children lining for candies.’’ his friend Ahmad Hasuna, lifted his hands in the air and looked up at the sky when I asked about his business. “There is nothing, it’s very difficult,’’ he said and pointed to several shops that hadn’t opened since the war broke out in the south.
Both Israeli Jews and Arab entrepreneurs here were united in their desperation, sipping on coffee and hopelessly gazing at the empty streets. At the Market House Hotel nearby, Alaa Marshagi, an Israeli Arab, sat at the reception and said there was only 10 percent occupancy compared to previous years, “all journalists.’’ His colleague Avi Cohen, an Israeli Jew, said most of the rooms were occupied by people who evacuated from the south at a heavy discount. “We are hosting them at a 50 percent loss, plus free meals,’’ he told Foreign Policy. “Right now, the government is helping, but that’s only until Nov 22.’’
The startup industry in Israel has been a great success and, although it stands to suffer less in comparison, it was already under pressure as investors pulled back from a country mired in mass protests over judicial reforms. Investments in the sector halved last year sensing instability as thousands gathered against the government’s judicial reforms that would allegedly weaken the courts and empower ruling politicians.
A group of global venture capitalists have come to the aid of budding Israeli startups and are trying to raise millions of dollars to save them from bankruptcy. They have launched an initiative called Iron Nation to protect the companies, and the country’s economy, from collapsing under pressure. (Up to 20 percent of reservists doubled up as employees in the tech industry.) The founders of the initiative claimed that 150 companies have already sought help for a chance at receiving between $500,000 and $1.5 million to keep their businesses running.
According to a study by Hebrew University titled “Civil Society Engagement in Israel During the Iron Swords War,” nearly half of the Israeli population volunteered in some way to help compatriots directly or indirectly reeling under the effects of Hamas’s attack and the concomitant war. Professor Michal Almog-Bar, the author of the study, told Israeli media that domestic philanthropic organizations and NGOs donated “tens of millions of dollars,” while donations from Jews in North America was estimated to run into hundreds of millions of dollars.
Meanwhile, to meet the costs of the war effort—expected to rise into billions of shekels—the economists are pushing the government to reprioritize the budget. Three-hundred Israeli economists have written an open letter to the government and called on Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich, who hails from a far-right party, to urgently implement a range of measures however unpalatable to some of their constituents. They have asked that the money kept aside for educational programs for the ultra-orthodox communities be redirected to military expenditure.
Strawczynski said the priorities are to reallocate billions of shekels towards “defense expenditure’’ and to “indemnizating affected individuals and firms’’ particularly in the south and the north. “We recommend redirecting what is called coalition funds,’’ money allocated for key programs of different parties under the coalition agreement. “These issues are related to the groups of voters of those parties, and not to common interest,’’ he said.
The Israeli government has presented an economic aid plan that offers $1 billion to help businesses, and Finance Minister Smotrich has promised that “whatever doesn’t involve the wartime effort and the state’s resilience will be halted.” The far-right, however, is still adamant on not letting Palestinians be a part of the solution. National Security Minister Itamar Ben Gvir, the most vocal far-right leader, has blocked a proposal to hire more Palestinians to meet the shortfall of workers in Israel farms.
The agriculture industry faces a shortfall of 10,000 farmers and the Israeli Ministry of Agriculture has proposed a plan to hire 8,000 of those from the West Bank—Palestinian women of all ages and men at 60 or older. Gvir, however, warns of a security risk, a claim that some support as mistrust between Israelis and Palestinians deepens but others find prejudiced, especially since 2 percent of the Israeli population already comprises Israeli Arabs who arguably have some sympathy for the Palestinian cause but are not in cahoots with Hamas.
Even as the shekel depreciated, a five-member committee of the Bank of Israel which oversees the monetary policy has decided to maintain the interest rate at 4.75 percent and the governor of the central bank underscored the economy’s resilience. “There should be no major changes to our fundamental fiscal position,” Bank of Israel Governor Amir Yaron said.
Israel is not new to conflict and has in the past sailed through, but this time the war is expected to be a longer affair and may turn into a regional confrontation. Strawczynski suggested the key factor would ultimately be the length of the conflict.
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