10 hours ago
Israel's economic losses as a result of Iran war estimated at $6bn
The total economic losses to Israel following the 12-day war with Iran are estimated at around $6 billion, with infrastructure hit particularly hard.
The war is likely to cost Israel about 1 per cent of its gross domestic product, or about 20 billion shekels ($5.9 billion), Israel Central Bank Governor Amir Yaron told Bloomberg television.
According to Naser Mufrej, professor of finance and economics at the Arab American University in Ramallah, along with heavy damage to property, the total losses also include revenue affected due to the brief closure of Israel's airspace as well as the impact on manufacturing and agriculture sectors.
'All productive sectors were affected heavily during the war,' Mr Mufrej told The National.
Israel and Iran entered into a fragile ceasefire this week after days of attacking each other. The US also entered the war with a strike on Iran's nuclear sites, after which the President Donald Trump announced the ceasefire.
The conflict began on June 13 when Israel launched a wave of strikes across Iran, killing senior military officials and hitting nuclear sites. Iran also launched retaliatory missile strikes on Israel, hitting a number of targets including residential buildings, a hospital and other infrastructure in Tel Aviv and other cities.
Israel, which has also been attacking Gaza since October 2023, is expected to take a hit to economic growth this year, according to analysts.
"Our forecast for 2025 [for Israel's economy] was downgraded from 3.3 per cent real GDP growth to 1.7 per cent real growth right after the military conflict began between Israel and Iran almost two weeks ago," Ralf Wiegert, head of Mena Economics at S&P Global Market Intelligence.
"So a reduction of 1.6 percentage points is probably at the high end of the spectrum and could be reduced further as Israel is going back to full capacity over the next couple of days."
Mr Wiegert also said that "replenishing the military arsenal will be more costly, which will increase the budget deficit in 2025 from the 5.7 per cent of GDP which we had projected previously".
With missile strikes having damaged vital infrastructure, military spending will push the country's fiscal deficit from 5.5 per cent to 8.5 per cent of GDP, the International Institute of Finance said in a note.
"Public debt will rise from 69 per cent to 74 per cent. Still, Israel's strong external position, ample reserves, and moderate debt burden offer resilience," it added.
Before the war with Iran, the International Monetary Fund in its World Economic Outlook in April projected Israel's economy to grow 3.2 per cent this year.
Rising compensation claims
Israel's Tax Authority has been receiving thousands of compensation claims from affected people for damaged property and vehicles since the beginning of the war two weeks ago.
As of Wednesday, it had received 41,651 claims, including 32,975 for structural damage, 4,119 for vehicle damage, and 4,456 for damage to contents and equipment.
It is estimated that thousands of additional structures have been damaged, for which no claim has yet been submitted, according to the Israel Tax Authority website.
Last week, Iran hit the Weizzman Institute, a major research institution in Israel, causing heavy damage to the building. It also hit the Bazan oil refinery complex in the port city of Haifa, damaging its infrastructure and shutting down its operations.
The cost of property damages from the Iranian attacks is estimated to be around double the sum of claims stemming from the Hamas attack on October 7 and subsequent attacks in time since then, the head of the Tax Authority's compensation department told the Knesset finance committee on Monday.
'I believe that we'll reach 5 billion shekels ($1.47 billion) [in compensation],' Amir Dahan said at the time.
'These are amounts we have never seen in direct damage. The Weizmann Institute and Bazan are huge events. In total, we have 25 buildings for demolition; in comparison, from the start of the war until the round with Iran, there was one building for demolition."
