The US bank JPMorgan Chase expects the Israeli economy to contract by 11% year-on-year in the last three months of this year, with the escalation of the aggression on the Gaza Strip.
Thus, the bank revised its initial forecast for the start of Operation Al-Aqsa Flood – launched by the Palestinian resistance led by the leadership of the Izz al-Din al-Qassam Brigades, the military wing of the Islamic Resistance Movement (Hamas), against the occupation, which it had estimated would have a slight impact on the Israeli economy, estimates described by specialists as "overly optimistic."
The revised forecast comes as Israel announced the start of a large-scale ground operation on Gaza and Prime Minister Benjamin Netanyahu warned of a "long and difficult" campaign.
The bank's estimates are among the most pessimistic from Wall Street analysts to date. However, investors have already sold Israeli assets heavily. Tel Aviv's main stock index has fallen 11 percent in local currency terms since Oct. 7, while the shekel has fallen to its lowest level since 2012.
However, JPMorgan still expects Israel's GDP to grow by 2.5% this year, and 2% in 2024. The estimate for an 11% decline between October and December relates to seasonally adjusted growth compared to the third quarter.
Specialists said the risks were rising and in turn were negatively affecting the economy. "Measuring the impact of the war on the Israeli economy remains difficult due to the extremely uncertain magnitude and duration of the conflict and the lack of high-frequency data on hand," they added.
When comparing the Israeli losses resulting from its recent conflicts, they found that the effects of the current war will be much greater, saying that what happened in 2014, when Israel launched a 51-day war on Gaza that included a ground attack on the region, and the 2006 war with Lebanese Hezbollah "hardly affected Israeli economic activity."
Netanyahu's government has called up nearly 350,<> reservists, the largest number in Israel's history.
In the face of an economic downturn, Israel's central bank kept its key interest rate at 4.75% on Oct. 23.
The decision not to ease monetary policy was aimed at helping the shekel, which is facing its longest losing streak since 1984.
Recently, the Israeli Ministry of Finance suggested that the war on Gaza, if it continues for a long time, will expose Israel's economy to recession during the rest of this year and next, and warned that the effects will be greater if the war expands to other fronts.
According to the senior economists department of the Israeli Ministry of Finance, if the war continues for a year or spreads to other arenas besides the Gaza Strip, there is a high probability of recession in the coming quarters, fearing the disruption of 1.8 million workers, who make up 41 percent of the Israeli market's workforce.
If the war spreads to other arenas or the war on Gaza alone continues for a year, leading economists predict that economic growth next year will fall to between 0.6% and 0.7%, and the economy will fall into recession.
For the 23rd consecutive day, the Israeli army on Sunday continued to launch intensive raids on Gaza, killing more than 8,20 Palestinians, mostly children and women, in addition to wounding more than 1870,<> others and <>,<> missing under the rubble, according to the Gaza Health Ministry.