The Ministry of Finance understands very well that an "iron sword" war will cause great damage to the economy, and they are already thinking about the day after, but still find it difficult to specify precise numbers.
"Contrary to what has been published, we understand that this is not another round, but a very significant event from an economic point of view, but it is also an event of extreme uncertainty," a senior Finance Ministry official told Israel Hayom, trying to justify the fact that no official number has yet been specified summarizing the damage that has already been caused and will still be caused to the economy. In the absence of one, unofficial assessments are thrown into the air, including on this paper.
"The duration and intensity of the incident are unclear. At this stage, it is also unknown what the policy regarding the education system will be, which affects parents' ability to go to work. All of these things have dramatic economic consequences. We have sets of internal scenarios that we're pricing in, but we don't have a number yet," he says.
Ministry of Finance (Archive), photo: Oren Ben Hakon
The only thing that may be clear to everyone at this stage is that the budget deficit will increase dramatically, the question is only by how much, and how the government will finance it. Even before the war, in August, the deficit relative to GDP rose to 1.3 percent, or NIS 23.1 billion, higher than earlier estimates.
The Ministry of Finance is still not discussing how to finance the war, but is not ruling out any of the options at this stage, including across-the-board cuts in government ministries the day after. This approach is understandable – it is impossible to come out with accurate estimates three days into the fighting, and aid from the United States is also a significant disappearance in this equation.
In the first hours of the event, the Ministry of Finance talked about the Second Lebanon War so that there would be an economic estimate of the costs of fighting in the economy – its cost to the economy was about 0.5% of GDP, meaning that in today's terms it is about NIS 9-10 billion for the entire period of the fighting.
The picture will become clearer when the Chief Economist of the Ministry of Finance, Dr. Shmuel Abramzon, issues an updated macroeconomic forecast, which is supposed to happen, according to the law, by November 1. It should be noted that the Ministry of Finance is considering postponing the publication due to the uncertainty surrounding the war.
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