Israeli tanks head towards the Gaza Strip border in southern Israel on Thursday, Oct.12, 2023. AP
Shafrir added that the war has cost Israel nearly $6.8 billion thus far.
He also stressed that calling 300,000 reserve soldiers, who had to leave their jobs, would adversely impact Israel's economy.
Furthermore, Shafrir said experience shows that the impact of the war on GDP “is expected to be felt in private consumption and tourism figures.”
For his part, Governor of the Bank of Israel Amir Yaron argued that the impact of war on Israel’s budget would be “manageable”.
During his participation in the Group of Thirty (G30) annual meetings, Yaron said the war will not result in a significant change in Israel’s fiscal policy, Reuters reported on Sunday.
He explained that before the war, Israel's debt-to-GDP ratio was just below 60 percent and a budget deficit of around 1.5 percent of GDP, with similar projections for 2024.
However, Yaron stressed that the Israeli army will have whatever it needs to support the war effort.
He also stated that Israel will use $30 billion from its $200 billion reserves to maintain the stability of the Shekel’s exchange rate.
Since the war broke out on 7 October, the Shekel lost 3.84 percent of its value, with ILS 3.99 now traded for $1.
Stock market drop
The main index of the Tel Aviv Stock Exchange, the TA-35 index, has tumbled 9.77 percent since 7 October, ending at nearly 1,652 points at Sunday’s close.
On Sunday, all shares dropped, with TA-35 and TA-125 shrinking by 3.6 percent each and the TA-90 index decreasing by 3.8 percent.
The TA-Bank index, comprising the top five largest banks in Israel, decreased by 4 percent. Stocks in the construction, building, and insurance sectors declined by 4-5 percent.
Credit rating stable for now
Moody's credit rating agency currently assigns Israel a rating of A1.
Fitch assigns Israel a corresponding rating of A+, while S&P gives it a slightly lower rating of AA-.
Since the start of the war on 7 October, Israeli air strikes against the Gaza Strip left over 2,750 Palestinians dead and 9,700 injured.
The air strikes have destroyed hundreds of homes in Gaza and rendered hundreds of thousands of Palestinians without shelter.
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