Bank of Israel says Turkish trade ban has had limited impact on Israeli economy

The Bank of Israel, the country's central bank, released a report last week which concludes that the current Turkish ban on trade with Israel has had a very limited impact on the Israeli economy.

"The Turkish embargo’s impact on imports and prices of imports to Israel was limited," the Bank of Israel assessed. The report further credited the Jewish state’s open economy and integration into the global economy. 

"This illustrates the importance of functioning markets and liberal trade policies in creating economic security, as well as the difficulty of individual countries to use trade restrictions on tradable goods as a political tool."

Israel and Turkey used to have close military and commercial ties. However, bilateral ties have deteriorated sharply during the presidency of Turkey’s current Islamist leader Recep Tayyip Erdoğan who openly supports Hamas, an internationally designated terrorist organization that openly calls for the Jewish state’s destruction. 

Following the Hamas Oct. 7, 2023, massacre of 1,200 Israelis and the subsequent Gaza war, Erdoğan’s anti-Israel and antisemitic rhetoric increased dramatically. The Turkish leader who has refused to condemn the Hamas atrocities against Israeli civilians, has falsely compared Israeli Prime Minister Benjamin Netanyahu with Nazi leader Adolf Hitler and accused the Jewish state of “war crimes” and “genocide” in Gaza. 

“Netanyahu and his administration, with their crimes against humanity in Gaza, are writing their names next to Hitler, Mussolini, and Stalin, like today’s Nazis,” Erdoğan stated last March. The Turkish leader also expressed strong support for Hamas. 

“Turkey is a country that speaks openly with Hamas leaders and firmly backs them,” Erdoğan confirmed. “No one can make us qualify Hamas as a terrorist organization,” he added. 

Last May, Erdoğan’s Turkey announced a halt of all trade with Israel due to the Gaza War. Israel’s former Foreign Minister and current Defense Minister Israel Katz blasted Erdoğan’s trade ban as harmful for both countries. 

“Erdoğan crossed a line and blocked ports for Israeli exports and imports. This is how a dictator behaves – trampling on the interests of the Turkish people, and businessmen and ignoring international trade agreements,” Katz stated. 

Since Turkey was at the time one of Israel’s leading trade partners, there were initial concerns that the Turkish trade ban would harm the import of consumer goods and prices in the Israeli market.

However, the new central bank report notes that the Jewish state’s economy quickly adapted to the Turkish trade ban and found viable substitutes for imports from Turkey. This resulted in what the bank report termed as "the limited impact of the embargo."

"Economic openness and the diversification of import sources – rather than isolation and domestic production – provided a solution to trade restrictions on tradable goods with a well-functioning international market," the central bank report stated. 

The report noted that prior to the Gaza War in October 2023, Turkish exports to Israel reached $5.3 billion, constituting 6.3% of all Israeli imports. During the same time, Israeli exports to Turkey totaled $1.5 billion or 2.5% of the Jewish state’s total export. 

Turkey also used to be a popular destination for Israeli tourists. Some 824,000 Israelis visited Turkey in 2022. Today, very few Israelis visit Turkey due to the tense relations between the two countries. This has had a negative impact on the struggling Turkish economy, which to a large degree relies on international tourism.