JPMorgan has sharply lowered its fourth quarter economic forecast for Israel. According to a research note made public on Friday, the country’s gross domestic product (GDP) may shrink 11% from the previous three months amid the escalation of hostilities with the Palestinian armed group Hamas.
Earlier this month, the bank forecast a 1.5% downturn, but the initial projections were deemed “too optimistic,” analysts suggested.
“Gauging the impact of the war on Israel’s economy remains difficult, both due to still-very high uncertainty about the scale and duration of the conflict and the lack of high-frequency data at hand,” JPMorgan stated.
The bank also cut its initial projections for the country’s yearly GDP growth to 2.5% instead of the previous 3.2%. Analysts, however, slightly raised the outlook for 2024, to 2% from the previous 1.9%.
JPMorgan noted that Israel’s previous conflicts, like the 2014 escalation of hostilities with Hamas or the 2006 conflict with the Lebanon-based armed group Hezbollah, “barely affected activity.” However, “the current war has had a much larger impact on domestic security and confidence,” analysts warned. For instance, the death toll estimated at around 1,400 Israelis as of Friday was already much higher than during the previous conflicts, while the number of mobilized reservists has already topped 350,000, the most in Israel’s history and more than 5% of the country’s labor force.
The most recent escalation of hostilities between Hamas, which controls much of Gaza, and the Israel Defense Forces started on October 7. It has since caused a global surge in the price of oil and safe haven assets, like gold and silver. Analysts fear the conflict could destabilize the Middle East, especially if it spreads to neighboring countries, which would in turn affect the entire global economy.
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