Bank of Israel says intifada cost NIS 31 b
By Moti Bassok
Haaretz, March 31, 2004
The intifada has cost Israel between NIS 31 billion and NIS 40 billion so far - not including defense costs - according to the Bank of Israel report for 2003, which was released yesterday. The amount comes to between 6.2 percent and 8 percent of the gross domestic product.
The report found that the intifada, which began at the end of September 2000, was one of the principal reasons for the recession between 2001 and 2003. The first areas affected were agriculture and construction, which lost NIS 12.2 billion from the beginning of the intifada until the end of 2001. Investments and private consumption were also hit hard. According to the report, confronting terror has required an increase in resources allocated to the defense industry.
The decrease in GDP in 2002 alone ranged from NIS 3.1 percent to 3.8 percent, with 1 percent constituting about NIS 5 billion. But this statistic doesn't express the cumulative damage of the intifada or the potential growth it thwarted. The intifada-related decrease in GDP in 2003 alone was lower than in the previous year (between 0.7 percent and 1.8 percent), due to the relative calming of the security situation.
Security forces decreased their operations in the territories in 2003, and related spending came to between NIS 1.5 billion and NIS 2 billion. Additional expenses, such as defending settlements and communities along the seam line, reinforcing police and Border Police forces and covering hospitalization costs, are estimated at more than half a billion shekels.
In addition, the cost of constructing the West Bank separation fence came to about a billion shekels in 2003. All told, security expenditure related to the intifada reached between NIS 3 billion and NIS 3.5 billion.
Another financial blow struck by the intifada was the depressed economy in the territories, as trade between areas within the Green Line and outside it dropped. In the short term, the extent of export from the West Bank and Gaza Strip is not expected to return to its pre-intifada level.
According to the Bank of Israel, the intifada-related damage to exports was relatively large in 2003, likely related to a dispute with the European Union over labeling the source of goods and imposing additional taxes. In addition, the gap that has developed over the last two years between international demand for goods and the extent of Israeli exports is at least partly linked to the security situation in Israel. Potential buyers abroad are concerned about ties with Israel due to concern over supply difficulties, businessmen are scared to visit Israel to see new businesses get off the ground, and potential investors refrain from sinking money in the area.
