The Israeli economy is expected to shrink by 2 per cent this quarter, according to a leading research centre, with hundreds of thousands of workers displaced by the war with Hamas or called up as reservists.

About 20 per cent of the Israeli workforce was missing from the labour market in October, up from 3 per cent before the fighting began, according to a report from the Taub centre for Social Policy Studies, a non-partisan think tank in Israel.

The spike in unemployment reflects the fact that about 900,000 people were called up to fight, stayed home to take care of children because schools had closed, evacuated from towns near the borders with Lebanon and the Gaza Strip, or couldn’t work because of physical damage to their industries.

Since October, some students have been able to return to school, and some displaced Israelis have been able to work remotely. Still, the economic implications for such a large disruption could be significant, especially with no end to the war in sight.

Projections for growth next year are lower than previously estimated, but the ranges vary, with some analysts saying that the economy could grow by only 0.5 per cent. The Bank of Israel has given probably the most optimistic projection of 2 per cent, citing Israel’s quicker-than-expected recovery from previous wars and from the Covid-19 pandemic.

“The wide range of projections that we are seeing comes from some of the different assumptions about how long and how intense the fighting will be,” said Karnit Flug, vice-president of research at the Israel Democracy Institute and a former governor of the Bank of Israel.

As of Sunday, 191,666 people in Israel had filed for unemployment benefits since the war began, with the vast majority saying they experienced a forced unpaid leave, according to the Taub centre.

Some 360,000 reservists were authorised for duty in October, the largest mobilisation since the Arab-Israeli war of 1973, also known as the Yom Kippur War, when 400,000 reservists were tapped to fight off a surprise attack from Egypt and Syria. The actual number of reservists called up for duty this time was between 200,000 and 300,000.

New York Times News Service