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News and views on Israel, Zionism and the war on terrorism.

September 22, 2002





The Intifada's Cost to the Israeli Economy

As the intifada rages on into its third year, the violence may soon claim another casualty: the Israeli economy.

Since late 2000 the economy has been in recession, perhaps the most severe in Israel's history. Per capita income has declined by 7%, economic activity has stagnated, the tourism industry has been decimated, unemployment has risen to over 11% and inflation is beginning to run rampant. The government's budget, which required years of austerity measures to balance, has been plunged back into deficit. The shekel, after a long period of stability, was devaluated and has fluctuated sharply during the last few months. And interest rates have soared steeply.

The recession is not due solely to the violence. The global economic slowdown, particularly in the United States, and the bursting of the New Economy bubble have had a disproportionate effect on the technology-oriented Israeli economy. Furthermore, the growth engines of the early 1990s — gradual economic liberalization, mass immigration from the former Soviet Union and regional integration resulting from the peace process — ran out of steam by the mid-1990s.

But the cost of the intifada to Israel should not be underestimated.

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