Written By: Tooba Rafiq
Economic Impact of the 2023 Israel-Palestine Conflict on Currency and Economy
Introduction
The Israeli-Palestinian conflict has been ongoing for decades and has had a significant impact on the currency and economy of both Israel and Palestine. The conflict has resulted in a range of policies and practices that have affected the economic development of Palestine, including restrictions on movement, discriminatory policies, and the destruction of infrastructure.
Impact on the Currency: Effects of the 2023 Conflict on the Israeli Shekel and Palestinian Economy
The conflict has been ongoing for a long time and has resulted in various military clashes, including the current Israeli-Palestinian war that has claimed many lives and injured thousands of people on both sides.
The International Monetary Fund expects global economic growth to slow down in 2024 due to the war, which has threatened to upend a world economy that was already reeling from multiple overlapping conflicts, complicating efforts to contain inflation. The Israeli shekel weakened about 2.9% to 3.9506 per dollar after the Bank of Israel announced it would sell up to $30 billion of foreign currency in the open market to maintain stability.
International Perspectives: Global Economic Implications and the Two-State Solution
A study by RAND Corporation found that a two-state solution would provide the best economic outcomes for both Israelis and Palestinians.
However, the current trajectory of the conflict is estimated to result in net costs for both parties over the next ten years. The study estimates Israelis would gain over two times more than the Palestinians in absolute terms — $123 billion versus $50 billion over ten years. But the Palestinians would gain more proportionately, with average per capita income increasing by approximately 36 percent over what it would have been in 2024, versus 5 percent for the average Israeli. Israel’s central bank said this week that it will sell up to $30 billion in foreign exchange to prop up the shekel and prevent its collapse
Impact on the Economy
The conflict has resulted in significant economic costs for both Israelis and Palestinians. The Israeli-Palestinian conflict has resulted in the displacement of hundreds of thousands of Palestinians, with many losing their homes and property. This has had a significant impact on the Palestinian economy, as many Palestinians have lost their sources of income and livelihoods.
Restrictions on Movement and Trade: Challenges Faced by Palestinian Businesses
The Israeli government has imposed restrictions which has limited the ability of Palestinian businesses to import and export goods, which has had a negative impact on the Palestinian economy.
Trade deficit grew from $1.658 billion in 1996 to $2.669 billion in 1999. The ratio of trade deficit to GDP soared, exceeding 50 % since 1995, up from 27 % in 1990. This deficit was underscored by a heavy concentration of trade with one partner, Israel, which accounted for around 69 % of total Palestinian trade transactions in 1999. Hence, the economy’s increased vulnerability to external shocks, especially those emanating from Israel.
The IMF warned that the world economy faces new uncertainty from the war between Israel and Hamas militants and could see fallout from the Middle East conflict — particularly to oil prices.
Infrastructure Destruction: The Economic Toll on Palestinian Territories
The Israeli-Palestinian conflict has resulted in the destruction of infrastructure in the Palestinian territories, including roads, bridges, and buildings. This has had a significant impact on the Palestinian economy, as it has made it difficult for businesses to operate and for people to access basic services like healthcare and education.
Conclusion:
In conclusion, the Israeli-Palestinian conflict has had a significant impact on the economy and currency of both Israel and Palestine. The conflict has resulted in significant economic costs, displacement and loss of property, restrictions on movement and trade, destruction of infrastructure, discrimination and apartheid, and exacerbation of living conditions. A resolution to the conflict is necessary to improve the economic situation in the region.
