Central Bank: War costing about NIS 1 billion per week or 0.7-0.9% GDP loss monthly

According to Fisher, the direct weekly cost of the war to the economy is between NIS 750 million and NIS 1.2 billion
 
Governor of the Bank of Israel Prof. Stanley Fisher predicted last week in a press conference arranged to report on the war's effects on the economy, that if the conflict in Lebanon lasts a month, the GDP will decrease by 0.7-0.9%, or some NIS 4.2-5.4 billion.
 
Fisher estimated that the war had already caused weekly damage of NIS 750 million-1.08 billion; the aggregate loss of GDP over three weeks of fighting is NIS 2.25-3.25 billion.
According to Fisher, the direct weekly cost of the war to the economy is between NIS 750 million and NIS 1.2 billion.
 
He added, however, that assuming fighting would be at the current intensity for a month, the war will decrease tax revenues by 0.3%, and that the total direct and indirect compensation payments will not be higher than NIS 3 – 3.2 billion.
Fisher noted that the effect of the crisis varied from sector to sector.
Industry had only been partially hit while the damage caused to the commercial sector would be far more extensive.
 
The tourism sector would suffer the most of all, both during the conflict and in its aftermath. Fischer estimated the cost to tourism alone would reach NIS 1 billion, and the effect would last for several months after the conflict finally ends.
 
Fisher called upon the Government not to raise taxes or cancel the recent reduction in VAT. “There is no need to increase VAT at present. We will have to consider taxation measures only in the event of a substantial change in the state of the economy." Fisher said.
 
Ministry of Finance estimated last week that the direct cost of the war, the second most costliest war after the 1973 war, would reach some NIS 20 - 21 billion, spread over two fiscal years.
 
According to the Ministry, the breakdown of this cost was as follows:
NIS 4.5-9 billion in air & ground combat costs, based on a cost of NIS 50-100 million a day;
NIS 3-4 billion in lost government tax revenues;
NIS 2 – 2.5 billion in increased Government spending;
NIS 1-2.5 billion for the Government’s share in compensation to employees and businesses in the north;
NIS 1-2.7 billion in direct damage to private homes, public buildings, farms and vehicles & other property hit by Hizbullah's katyusha rockets; and rebuilding damaged infrastructures.
The Government, according to the Ministry, will also have to prepare and execute a highly extensive aid program to revive medium & small businesses in the north of the country.