Israel’s war on Gaza, now well into its fourth month, has taken a toll on its own economy with many industries pausing business even as a few continue to get new investments.
Since October, Israel’s government has subsidised the salaries of reportedly 360,000 mobilised reservists deployed to Gaza – many of whom are high-tech industry workers in finance, artificial intelligence, pharmaceuticals and agriculture.
In November, the Bank of Israel put the war’s “gross effects” on Israel at 198 billion shekels ($53bn) and pared back its estimates for economic growth to 2 percent per year for 2023 and 2024, down from 2.3 percent and 2.8 percent.
In December, Israel’s Finance Ministry said that the war will likely cost Israel approximately $13.8bn this year if its high-intensity phase concludes during the first quarter of 2024.
In the midst of that, experts are watching to see how business is doing on the ground.
One of the industries that have continued to do well is the high-tech sector, its fastest-growing area for several years, which today accounts for close to 20 percent of the country’s gross domestic product (GDP) and 14 percent of jobs.
Since the Israeli start-up scene exploded in the 1990s, Israel has established itself as the largest tech centre in the world, second only to Silicon Valley. More than 500 multinational corporations – from Google to Apple, IBM to Meta, and Microsoft to Intel Corp – operate in Israel.
And while there are concerns if companies would continue investing in a nation at war, for the moment at least, there’s no evidence to say that’s a real threat.
Show of support
Israel’s economy is expected to shrink on account of the war [File: Amir Cohen/Reuters]
Within one week of October 7, more than 220 venture capital firms, including Bain Capital Ventures, 8VC, Bessemer Venture Partners, and GGV Capital, signed a public statement to express solidarity with Israel and called on investors worldwide to continue to support its tech ecosystem.
From December 17-20, dozens of senior executives from US-based venture capital, tech and private equity firms took part in the Israel Tech Mission, entailing meetings in Jerusalem and Tel Aviv between these executives and top Israeli government officials. Essentially, it was a high-profile delegation showing the Israeli tech sector support amid this war.
Ron Miasnik is an investor for Bain Capital Ventures who co-organised the Israel Tech Mission with David Siegel, the CEO of Meetup.com.
“We are longtime investors in the Israeli startup ecosystem, and have made it a priority to visit the region and meet with teams there to continue to support stability and economic prosperity in the area,” Miasnik told Al Jazeera. “In the long term, we believe in the resilience of the Israeli startup ecosystem and are committed to not only continuing but deepening our focus on the area,” he added.
Hillel Fuld, a tech columnist and startup adviser based in Beit Shemesh, Israel, pointed out that in December, US chipmaker Intel Corp confirmed its plans to build a $25bn chipmaking factory in southern Israel – a development hailed by Netanyahu as the “largest investment ever” in Israeli history. With a $3.2bn grant from the Israeli government, Intel’s planned investment is a big boost to Israel’s tech sector amid this war.
In the final quarter of last year, Israeli startups managed to raise $1.5bn and “out of those deals, high-risk ‘seed’ funding was $220m in 31 rounds”, Fuld said.
Palo Alto Networks, a Santa Clara, California-headquartered multinational cybersecurity company founded by American-Israeli entrepreneur Nir Zuk, has a history of acquisitions in Israel. On October 29, it acquired Dig Security for roughly $300m, then it acquired Talon Cyber Security for $615m.
But the picture is slightly mixed, said Benjamin Bental, a principal researcher and economics policy programme chair at the Jerusalem-based Taub Center for Social Policy Studies. “When one looks at the number of players, one sees a decline. When one looks at the sums invested, one sees basically stability, meaning that those who stay invest more,” he said.
Israeli officials face the challenge of needing to restore confidence and a sense of security – which will not prove easy – to boost investments.
“Beyond a clear military and political outcome both in the Gaza Strip and along the Lebanese border, and a repatriation of the hostages, this requires a clear and goal-oriented economic policy. It is not yet clear how this will eventually be addressed,” Bental told Al Jazeera.
Tens of thousands of people have been displaced in the last few weeks on both sides of the Israel-Lebanon border as Israeli troops and Hezbollah fighters have fired missiles at each other.
Tourism nosedives
Number of tourists in Israel has shrunk since the start of the war [File: Ammar Awad/Reuters]
Perhaps the sector of the Israeli economy that has suffered the most amid this war is tourism which accounted for 2.6 percent of GDP before the pandemic in 2019, before falling to 1.1 percent in 2021. Both foreign and domestic tourism in Israel have flatlined since the start of the war.
Across Israel, restaurants and stores remain empty. Soon after Hamas’s incursion into southern Israel and the eruption of the war on Gaza, a long list of airlines cancelled or suspended the majority of their flights to Tel Aviv, and many tourists cancelled their plans to visit Israel.
Nonetheless, some major airlines such as Lufthansa and some of its subsidiaries, including Swiss International Air Lines and Austrian Airlines, resumed their flights to Israel earlier this month.
Prior to Operation Al Aqsa Flood, visitors to Israel numbered above 300,000 each month. In November, that figure reportedly sank to 39,000.
“War is not only tragic, it’s also expensive. The impact on tourism, for example, is a very real one and there is no ignoring it,” Fuld told Al Jazeera.
Hard-hit construction industry
Construction has come to a standstill since the start of the war [File: Ronen Zvulun/Reuters]
Construction, accounting for 14 percent of Israel’s GDP, has taken a huge hit since this war began. Across Israel, construction projects have been paused since October and Israel indefinitely froze worker permits for Palestinians who make up 65-70 percent of the workforce in Israel’s construction sector.
Consequently, industry in Israel and the West Bank’s economy have taken a huge hit. Of the 110,000 Palestinians who had permits to work either in Israel-proper or on illegal settlements in the West Bank and East Jerusalem, most were working in construction.
The gap has not been filled by Israeli workers, given how the reservists have been called to fight in the war, nor by foreign workers who have, in large numbers, fled Israel amid this conflict.
In November, the Israel Builders Association said that Israel’s construction industry was operating at roughly 15 percent of its pre-October 7 capacity. A month later 8,000-10,000 Palestinian workers were permitted to resume work on Israeli settlements in the West Bank – a decision the government made after it came under significant pressure from business and factory owners hit hard by “supply shocks”.
But that’s far from sufficient and to fill the gap, Israel plans to bring in approximately 70,000 construction workers from China, India, Moldova and Sri Lanka.
The Gaza war’s ripple effects throughout the greater Middle East are also negatively impacting Israel’s economy.
Israel imports diamonds, cars, petroleum, and broadcasting equipment, among other things, goods that come via the Red Sea. The recent Houthi missile and drone attacks in this body of water in retaliation for Israel’s attack on Gaza have not only disrupted global trade but also impacted Israel’s imports. Many of Israel’s imports from Asia are now being rerouted around Africa, bumping up costs.
The road ahead
Roughly 20 percent of the Israeli public reports their household income being hit to a “large” or “very large” extent since the start of their country’s war on Gaza.
In a recent survey, aid organisation “Latet” (“to give”) found that more than 45 percent of the public fear that economic hardship awaits them either later on in this war or after the war finishes. What is clear is that those Israeli families who were already living in poverty or who qualified as food insecure prior to October 7 will suffer the most from the economic problems stemming from this war.
“It’s hard to know what’s going on in the minds of our politicians, but Netanyahu and his government are facing unprecedented global diplomatic pressure to end the war and the economics of the war is playing less of a role in the decision-making,” said Fuld.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
