Some 300 of Israel’s leading economists urged the Israeli government on Monday to curb nonessential spending amid the ongoing war with the terror organization Hamas.
In a collective letter addressed to Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich, the leading economists stressed the severity of the potential economic crisis that the Jewish state would face.
“You do not understand the magnitude of the economic crisis that Israel’s economy is facing, “the letter stated.
“Continuation of the current conduct harms Israel’s economy, undermines citizens’ trust in the public system and undermines the State of Israel’s ability to recover from the situation it finds itself in,” the letter warned.
The signatories of the letter included former Bank of Israel governors, Prof. Jacob Frenkel, Prof. Eugene Kandel, former Finance Ministry Dir.-Gen. Haim Shani, Prof. Leonardo Leiderman from Tel Aviv University and Noble Prize winner in Economics Joshua Angrist from the Massachusetts Institute of Technology.
The economy experts said that the war with Hamas, which is expected to be protracted, requires a dramatic change in priorities concerning the use of the national budget.
“The severe blow inflicted on Israel requires a fundamental change in the order of national priorities and a massive diversion of budgets in order to deal with the damage caused by the war, aid the victims, and rehabilitate the economy.”
“Cosmetic changes within the existing budget do not come close to the required scope of expenditure,” the letter added.
The economists are urging Netanyahu's government to halt nonessential expenditures, such as the transfer of coalition funds amounting to NIS 9 billion ($2.2 billion).
A growing number of Israeli ground forces are currently operating inside the Gaza Strip implementing Jerusalem’s war effort to topple the Hamas regime and dismantle the terror organization’s military capabilities.
Israel Defense Forces currently has approximately 170,000 soldiers. However, following the risk of a potential two-front war with Hamas in the south and Hezbollah in the north, Israel has called up more than 300,000 reservists. This is already impacting the Israeli economy.
A whopping 70% of Israeli high-tech companies reported that they already face challenges due to the shortage of manpower amid the unprecedented military call-up, as many of the reservists work in the tech industry.
The technological export-oriented sector is widely seen as a critical engine in the Israeli economy.
Israel Innovation Authority CEO Dror Bin warned that the large scale military callup undermines the tech sector.
“The slowdown in fundraising cycles and the mobilization of reserve soldiers to the war pose a challenge for a significant number of high-tech companies,” Bin said.
“This preliminary survey and the many in-depth conversations we have had indicate that there is a significant number of high-tech companies with a short runway for whom the war has delayed or stopped their capital raising round,” he added.
Many of the Israeli tech companies are new startups that are sensitive to large macroeconomic events, such as wars and socio-economic instability.
“This means that there are companies that are at risk of being closed in the coming months,” Bin warned.
Earlier in October, Israel's Bank Hapoalim projected that the ongoing Hamas war could cost the Israeli economy at least 27 billion shekels ($6.69 billion).
The All Israel News Staff is a team of journalists in Israel.