Empty restaurants and hotels, beaches deserted by tourists who prefer less dangerous holiday destinations: one year of Palestinian intifada has left Israel's tourism industry in tatters and its entire economy on the brink of meltdown. And the global slump caused by the September 11 terrorist airborne onslaught on New York and Washington, which killed thousands of people, rules out any recovery in the near future.
Just like all the other stock exchanges worldwide, the Tel Aviv bourse has tumbled over the past few days, while the shekel has continued to plummet. When it erupted on September 28 last year, the Palestinian uprising dealt a blow to an already ailing Israeli economy, which had been hard hit by the bursting of the hi-tech bubble.
The sector had spearheaded and sustained the soaring Nasdaq, the share index of the "new economy" where some 100 Israeli companies were listed, more than any European country. "We have had a run of bad luck," says Danny Catarivas, the deputy director general of the Israeli finance ministry, adding nevertheless that the damage done by the intifada to the economy "is for the moment limited to sectors such as tourism, agriculture and building." However, he admits that "as the intifada carries on, the economy of Israel, which unfortunately has become a risky country again, will suffer."
All of the country's main economic indicators have suffered severe setbacks. Israel's gross domestic product (GDP) growth, which had climbed to 5.9 percent last year, is not even expected to pass the one-percent mark in 2001, according to Treasury estimates. During the second quarter, GDP growth even receded by 0.6 percent compared to its 2000 level.
Ordinary people are also feeling more and more this down cycle, which is threatening to turn into a real recession. GDP per capita fell by 2.7 percent during the first quarter of 2001. The tourism sector has been hit hardest by the shockwaves of the intifada, with thousands of lay-offs since the violence broke out. The number of foreign visitors in Israel has dropped by half for the first six months of 2001, provoking losses estimated by the tourism minister at $1.2 billion.
According to the Bank of Israel, foreign investment, which in 2000 had leapt to unprecedented levels under the impulse of the hi-tech boom, has dropped from seven billion dollars to $3.4 billion for the first half of 2001.
Some 120,000 Palestinians who used to work in Israel before the uprising have been trapped in the West Bank and Gaza Strip since the territories were sealed off last year, creating a costly vacuum in building and agriculture, sectors whose labor force were respectively 30 and 12 percent Palestinian.
Israeli Prime Minister Ariel Sharon has also had to plan an extra budget to finance beefed up army and police operations, costing his government an estimated $500 million since the start of the year.
As a result, the state's deficit, swollen by the economic slowdown and the ensuing drop in fiscal revenue, is expected to reach to 3.5 percent of the gross national product, according to the Treasury. The finance ministry says defense is now expected to account for 23.7 percent of government spending with $7.2 billion.
"All things added up, the intifada will have cost us one to 1.5 growth points this year," Catarivas predicts. The impact of the attacks on the World Trade Center has not yet been assessed. — (AFP, Liege)
by Jean-Luc Renaudie
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
