(Mirror.)

Flug, the former Bank of Israel governor and now vice-president of research at the Israel Democracy Institute, says there is a risk the […] government cuts investment to free up resources for defense. “That will reduce the potential growth (of the economy) going forward,” she said.

Researchers at the Institute for National Security Studies are similarly downbeat.

Even a withdrawal from Gaza and calm on the border with Lebanon would leave Israel’s economy in a weaker position than before the war, they said in a report in August. “Israel is expected to suffer long-term economic damage regardless of the outcome,” they wrote.

“The anticipated decline in growth rates in all scenarios compared to pre-war economic forecasts and the increase in defense expenditures could exacerbate the risk of a recession reminiscent of the lost decade following the Yom Kippur War.”

Related: Occupation’s GDP growth revised down to 0.3% as war on Palestinians takes economic toll:

Israel’s economy grew slower in the second quarter than previously thought, data showed on Tuesday, as [the] war in Gaza […] continued to weigh on growth.

Gross domestic product (ILGDP=ECI), opens new tab rose by an annualised 0.3 in the April–June period, the Central Bureau of Statistics said in its third estimate, down from 0.7% reported a month ago and from an initial 1.2% published in August.

The economy was supported by gains in consumer and state spending and in investment in fixed assets, while exports fell.

Last week, the Bank of Israel trimmed its […] economic growth estimate in 2024 to 0.5% from a prior estimate of 1.5%.

Along with a weakening economy, inflation has spiked and central bank officials have warned of possible interest rate increases. It held rates steady last week for a sixth straight policy meeting.

First-quarter GDP growth was unrevised at 17.2%, as the economy bounced back from a steep contraction in the fourth quarter of 2023 when the war began.

Oh no.