Israel’s Economy Under Siege: The Fight for Survival After Oct. 7
As Israel nears the one-year mark of the devastating Oct. 7 attack, the nation's economy continues to bear significant hardship. Prime Minister Benjamin Netanyahu has recently tried to ease the minds of business owners, stating that the damage to Israel’s economy is only temporary. However, reality paints a much grimmer picture. The war has taken a heavy toll on Israeli businesses. Fears of escalation with Iran and Hezbollah have made Israel a significantly less attractive destination for tourists as well as business travelers. Souvenir shops, once flowing with tourists, have now been forced to close their doors. Hotels that were once full, are now struggling to remain at half capacity. Feared escalation has caused major airlines such as Delta and United to suspend flights for the foreseeable future.
While most of the nation's economy has struggled as a result of the war, El Al, Israel's largest airline, has had its best numbers to start a year ever. With Delta, United and other major airlines discontinuing flights, El Al has taken over the workload of passengers trying to enter Israel. El Al’s profit in the first six months of 2024 was nearly double its 2023 profit. El Al shares are currently up 60%, while United States airline stocks are down 40% over the same period. After facing bankruptcy just five years ago, it seems like the war in Israel has actually helped El Al climb out of an economic hole.
The struggle extends beyond tourism. Due to Yemen’s Houthi rebel group endangering ships passing through Egypt’s Suez Canal, many boats have not been able to reach Israel. Israeli ports, crucial hubs for international trade, have seen a 16% drop in shipping activity through the first half of this year compared to last. This has caused a ripple effect throughout Israel’s economy, affecting anything from imports and exports to the availability of goods and services.
Perhaps, worst of all, a large number of businesses have been forced to close. High interest rates, more expensive financing costs, declining turnover and insufficient government assistance have all contributed to the wave of business closures. Within nine months of the Oct. 7 attack, 46,000 businesses in Israel have shut down. By the end of 2024, the number is projected to grow to as many as 60,000, a significant increase compared to the usual number of businesses that typically close on average, which is 40,000. “There is effectively no sector in the economy that is immune to the repercussions of the ongoing war,” CofaceBDI CEO Yoel Amir told The Times of Israel. “Businesses are coping with a very complex reality: fear about an escalation of the war coupled with uncertainty about when the fighting will end alongside continued challenges such as staff shortage, low demand, growing financing needs, an increase in procurement costs and logistical issues, and most recently the export ban by Turkey are all making it increasingly difficult for Israeli businesses to survive this period.”
We can't ignore the challenges Israeli businesses face today. However, Israel has proven time and time again its ability to bounce back better than ever from adversity. In the meantime, entrepreneurs and business owners must adapt and find ways to keep their companies afloat. While the economy’s future seems uncertain, one thing remains clear: resilience is instilled into the fabric of Israel's history.
Photo caption: 46,000 businesses in Israel have shut down since the start of the war.
Photo credit: Unsplash
