Bethlehem-Ma’an-The British magazine “The Economist” said that the nightmare scenario for the Israeli economy is a comprehensive war with Hezbollah, stressing that economic policy makers are more concerned about the beginning of the conflict.

The magazine reported that the Israeli economy should have been on the road to recovery, after all, many of the 300,000 workers who left their jobs to fight returned to offices, factories and farms. Instead, the difficult situation has become more acute than ever.

‘The nightmare scenario for Israel is a conflict that could reach Jerusalem and Tel Aviv, the country’s commercial hubs. But even a less intense war in which fighting is limited to the north of the country could be enough to upend its economy,’ she said, adding that ‘a government that pursues a policy of free spending is not helping matters.’

‘The deficit is now expected to reach 8.1% of GDP this year, nearly three times what was expected before the war,’ she said, noting that ‘investors are uncertain about Israel’s ability to recover. The shekel is volatile, Israeli banks are experiencing capital flight, and the three largest banks are reporting a significant increase in the number of customers asking to transfer their savings to other countries or to link them to the dollar.’

‘Although inflation remains above target, the central bank chose to hold its previous policy rate at its August policy meeting, fearing it would derail the recovery,’ she added. ‘Then there is the nightmare scenario, where a few investors are preparing for a war that could engulf all of Israel, including Jerusalem or Tel Aviv, although Hezbollah may be able to launch such an attack.’

‘Under such a scenario, economic growth will be severely damaged, perhaps more severely than it was after October 7. Military expenditures will rise, and investor flight will likely topple the banks and push the shekel lower, forcing the Bank of Israel to intervene and spend its reserves. Whatever happens, Israeli economists are resigned to things getting worse,’ she stressed.

Source: Maan News Agency