Ex-treasury Head Warns of $4.3 Billion Loss From Gaza Offensive

Doron Cohen claims the four weeks of fighting will cause a 1.5 percent drop in economic output.

Tomer Appelbaum

Although Finance Minister Yair Lapid and Director General Yael Andorn, have been projecting a sense of optimism over the ability of the government and the economy to absorb the expenses of the war in the Gaza Strip, Andorn’s immediate predecessor in the position, Doron Cohen, is projecting a 15-billion-shekel ($4.3 billion) loss to the economy as a result of the military operation.

That includes lost tax revenues of between 3 billion shekels and 5 billion shekels, only some of which will be recouped later. Cohen estimated the direct cost of the war so far at 4 billion shekels to 5 billion shekels.

“Annual growth without [offshore] natural gas was less than 3%,” before the war, said Cohen, who stepped down as Finance Ministry director general about a year ago. But he also acknowledged positive economic data, including the relatively small budget deficit and the strength of the shekel and the stock market even during the course of the fighting.

“The Finance Ministry’s tool kit currently will not allow it to ‘go wild’ in covering the costs of the war,” he warned. “Yes, war causes economic damage. War has costs,” he cautioned. He also questioned suggestions by Lapid that the direct cost of the war to the government could be absorbed in this year’s budget.

Last week Andorn talked up the Israeli economy’s resilience to the effects of the security situation, resilience she said was demonstrated with regard to similar military operations in the past decade and has been aided by the government’s fiscal discipline in recent years.

“Events of this kind have a moderate, short-term effect,” she said in reference to the current hostilities. Officials at the finance and defense ministries declined to speak on the record regarding the cost of the fighting and the costs that will be incurred when it ends.

“We will soon have had four weeks of fighting. There is a 1.5% drop in economic output, meaning about a 15 billion shekel loss in economic production,” Cohen claimed. “That’s not inconsiderable. Based on past experience, one can say that about half of the loss will already be recouped in the next quarter, but a portion is a permanent loss,” he added.