Economic aftershocks of war on Gaza felt across region — experts

AMMAN — After nine months of the Israeli war on Gaza, it is still difficult to predict the outcome of the newest in a series of Hamas-Israeli wars. 

According to recent data, Israeli forces mobilised 300,000 reserve soldiers, 83 per cent of whom are men, 45 per cent of the reservists are 20 to 29-years-old, 32 per cent are 30 to 39-years-old, 15 per cent are 40 to 45-years-old, and 8 per cent are 50 to 69-years-old.

For the time being, Israel suffers from the labour market shock caused by reservists engaged in the warfare and some 75,000 Palestinian workers from the West Bank and 12,000 from the Gaza Strip, whose Israeli work permits are put on hold. 

“Though not over, the war on Gaza has, to differing degrees, impacted several economies in the Arab region. The Gaza Strip is the most affected, and it will require massive post-war reconstruction,” noted Riad Khoury, professor and former dean of the Business School at the Lebanese French University in Erbil, adding that it will not be an ordinary effort at rebuilding, as in the wake of some other disasters, but would also involve political and other efforts.

“The postwar needs of the Gaza Strip will be enormous: All universities are destroyed, most hospitals are severely damaged, etc. Also, the war on Gaza necessitates extraordinary efforts at rebuilding and the reconstruction would be much larger than for most other recent disasters,” Khouri added.

Khouri also said that countries mostly affected by the war are Jordan, Egypt, Lebanon and the West Bank. “Economic consequences of aggression on Gaza are of course negative on these four countries. Import and export volumes and prices are adversely affected by the Yemeni threats on the Red Sea and Arabian Sea navigation." 

Former Jordanian minister of Planning Taher Kanaan, noted that post-war reconstruction is the responsibility of the International Community, Arab countries, and particularly of Israel if the ICJ manages to impose compensation ruling against it.

A German researcher Benjamin Schutze from the Freiburg Institute for Advanced Studies maintains that the economic impact of the war in Gaza is felt in the EU countries but much less than in the Middle East.

"Quite obviously, the crucial point is Israel’s destruction of an entire society in Gaza — directly facilitated by the EU and the US political and military support," noted Schutze, adding that despite declarations from the Israeli side that it would pay for the reconstruction of the Gaza Strip, in reality, it is unlikely to happen.

Khoury also that the war on Gaza has had significant impacts on Jordan and the broader regional economy, affecting multiple sectors and exacerbating existing economic challenges.

"Tourism is among the hardest hit sectors. Jordan, which had seen a recovery in tourism with record numbers of visitors in early 2023, experienced a sharp decline following the onset of the war. Hotel occupancy rates dropped by 50-75 per cent, and many tourist bookings were cancelled," noted Adli Kandah, a Jordanian economist, adding that this sector is crucial as it contributes around 14-15 per cent to Jordan’s GDP. 

Talking about the most effective sectors, Kandah highlights trade and transport because, "Disruptions in trade routes and increased shipping costs due to regional instability have posed challenges to Jordanian businesses and this has led to a decrease in trade activity, particularly with the West Bank and Gaza, which directly impacts the movement of goods and services."

Investment also has seen a downturn as well, Kandah continued, adding rising costs and uncertainties have made Jordan a less attractive destination for foreign investors. 

"The investment sector’s contribution to GDP is projected to decrease significantly, potentially from 25per cent to 17 per cent," Kandah underlined, adding that energy and food security are additional areas of concern. 

In response to these challenges, Kandah continued, "Jordan may need to adopt robust economic policies and seek international support to stabilise its economy and protect various sectors from the adverse effects of the conflict."