Live updates: Follow the latest news on Israel-Gaza
We are in the third week of the Israel-Gaza war with a growing risk of it becoming yet another drawn-out battle that will leave severe economic scars.
This and previous wars mean horrendous loss of life and human capital, forced migration and displacement, destruction of infrastructure, housing, businesses and productive capacity, of cuts to public utilities, water, power, fuel – all threatening the survival of the remaining population. Overpopulated Gaza is already “de-developed” and deconstructed.
The International Monetary Fund’s September report on Gaza highlighted the calamitous situation in the enclave before the current war. Gaza’s real gross domestic product growth averaged just 0.4 per cent during 2007-22, with real GDP per capita declining at an annual average rate of 2.5 per cent.
By 2022, per capita income in the West Bank was four times higher than in Gaza, reflecting the blockade and recurrent wars resulting in little trade and investment. Unemployment was as high at 45 per cent in 2022 and 53 per cent of the population lived below the poverty line.
By contrast, Israel’s per capita income was eight times higher than in the West Bank and Gaza.
Reconstruction was one of the only “growth” sectors: in 2022, between $345 million and $485 million was required for immediate and short-term recovery and reconstruction needs in Gaza.
Israel’s policy of economic warfare against Gaza has been very costly.
Will the current war engulf Lebanon, Syria, Iran, Iraq and the Gulf? We don’t know yet.
Past wars have disfigured the Middle East. Beyond the human cost and war-related destruction of physical assets, war-affected countries witnessed a sharp contraction in economic activity, as well as fiscal, current account and balance of payments deficits, currency crises and high inflation.
They also faced sector-specific collapses – tourism, trade, manufacturing, weaker financial systems – along with a diversion of resources to the military and build-up of military assets at the expense of economic and social development.
Wars result in large-scale displacement of populations and forced migration, with the Mena region already hosting (end-2022) about 2.4 million refugees, in addition to about 12.6 million internally displaced persons, according to the UN refugee agency.
More displacement will put severe strain on the hosting nations’ budgets and finances as well as their socioeconomic-political stability.
A collapse in investor confidence in the conflict and neighbouring nations results in lower domestic and foreign direct investment flows. An estimate of the opportunity costs in financial, economic, social, political, military, environmental and diplomatic terms for the entire region for the period 1991-2015 is a staggering $15 trillion.
With the global economy tentatively recovering from the aftermath of the Covid-19 pandemic, the Russia-Ukraine war, high inflation and slow growth, the continuing war generates greater global geo-eco-political risk and uncertainty.
Global markets have already reacted. Safe-haven assets, including the dollar and gold, gained, while credit default swaps on Middle Eastern nations' debt (including Saudi Arabia and Qatar) have spiked.
The current surge in oil prices could accelerate with a further escalation or broadening of the war, with the Middle East accounting for more than one third of the world’s seaborne oil trade and the Suez Canal about 15 per cent of world trade.
An oil and commodity shock resulting from the likely disruption in transport and logistics would cut growth and raise inflation rates. A scenario emerges of continued monetary policy tightening by central banks, slower credit growth (affecting both households and businesses alike), increased refinancing risks and, potentially, debt crises or defaults and a global recession.
The future is clouded by the fog of war. A priority is to address humanitarian concerns: amid the massive human toll, Gaza’s citizens run the risk of starvation and the spreading of diseases without access to water, food, health care and electricity.
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Palestinians look for survivors of Israeli bombardment of the Gaza Strip at Nusseirat refugee camp. AP -
A survivor is found in the rubble in Nusseirat. AP -
A man is given oxygen and pulled from the rubble in Nusseirat. AP -
This desperate search for survivors is being replicated across the Gaza Strip. AP -
Yocheved Lifshitz speaks to the media outside a Tel Aviv hospital after being released by Hamas. EPA -
Israeli women who were held hostage by Palestinian Hamas militants, Yocheved Lifshitz and Nurit Cooper (also known as Nurit Yitzhak), are released by the militants. Reuters -
Israeli Prime Minister Benjamin Netanyahu, right, welcomes French President Emmanuel Macron before their talks in Jerusalem. AP -
Palestinians search for casualties at the site of an Israeli air strike on a house in Khan Younis, in the southern Gaza Strip. Reuters -
Palestinians inspect the damage of a destroyed house that was hit by an Israeli air strike in Khan Younis. AP -
Ms Cooper and Ms Lifshitz arrive at the Tel Aviv Sourasky Medical Centre after being released by Hamas on Monday. AFP -
A woman cries next to the rubble of a building after Israeli strikes on Rafah in the south of the Gaza Strip. AFP -
Wateen, a 14-month-old Palestinian baby, who was wounded in an Israeli strike that killed her mother and injured her twin brother Ahmed, recovers at Nasser hospital, in Khan Younis, Gaza Strip. Reuters -
A Palestinian girl clutches salvaged books as people look for survivors in the rubble of a destroyed building hit in an Israeli strike in Khan Younis. AFP -
People mourn during the funeral of members of the Abu Morad family who died following Israeli strikes, in Khan Younis. AFP -
A wounded Palestinian man arrives at Nasser Medical Complex, following Israeli air strikes on the town of Khan Younis in the southern Gaza Strip. AP -
Red Crescent Society employees sort humanitarian aid bound for Palestinians in Gaza, at a warehouse in Arish, Egypt. EPA -
Ayman Abou Chamalah stands next to his daughter Mecca as she receives care inside an incubator at a hospital in Rafah. AFP -
Israeli soldiers carry the coffin of Erik Kraunik, chief of security in the kibbutz of Be'eri, during his funeral at a cemetery in Yehud, Israel. AP -
A man sits among the rubble of a building destroyed in Israel's bombardment of Rafah, in the southern Gaza Strip. AFP -
A Red Crescent worker sorts aid for Palestinians in Khan Younis, in the southern part of the blockaded enclave. Reuters -
Israeli soldiers take part in a drill near the border with Gaza ahead of an expected ground invasion. EPA -
Men fill fuel containers with drinking water in Rafah. AFP -
Smoke billows over Gaza after an air strike, as seen from southern Israel. AP -
A person holds a child as Palestinians gather in Khan Younis at the site of a house destroyed during an Israeli bombardment. Reuters -
Israeli soldiers sit on top of a tank near the border with Gaza. Getty Images -
Buildings destroyed by Israeli air strikes in Khan Younis. Reuters -
Palestinians are evacuated from a building in Rafah that was hit during Israel's bombardment. AP -
Shahar Idan, 9, mourns during the funeral of his brother Maayan, 18, who was killed by Hamas gunmen in the kibbutz of Nahal Oz. His father Tzahi is being held hostage in Gaza. Reuters -
Palestinian doctors treat a premature baby at Al Aqsa Hospital in Deir Al Balah, Gaza. AP -
Rescue crews search for bodies after Hamas militants attacked the kibbutz of Be'eri in Israel. Getty Images -
Lorries carrying humanitarian aid head to Deir Al Balah after crossing from Egypt through Rafah. Bloomberg -
Palestinians evacuate survivors in Deir Al Balah after an Israeli bombardment. AP -
Smoke rises after Israeli air strikes on Gaza. EPA -
Israeli soldiers at a position along the border with Lebanon. EPA -
A woman leans against the window of an ambulance outside Kuwait Hospital after an Israeli strike in Rafah. AFP -
A Palestinian cries as the body of his daughter is recovered from beneath the rubble of a building destroyed during an Israeli air strike on Rafah. AFP -
A convoy carrying humanitarian aid arrives in Rafah after crossing into the Gaza Strip from Egypt. Bloomberg -
The pictures of more than 1,000 people abducted or killed during the attack by Hamas militants are displayed on empty seats at Tel Aviv University. Getty -
Palestinians are evacuated from buildings in Rafah after the bombardment of the Gaza Strip. AP -
Israeli soldiers gather at an undisclosed location near the border with Gaza. EPA -
Palestinians mourn outside a house in Gaza struck by Israel. Reuters -
A bullet-riddled fridge in a house in the kibbutz of Kissufim in southern Israel, where 14 people were killed and four were abducted by Hamas militants on October 7. AP -
Football fans inside Anfield stadium hold up Palestine flags during the Liverpool-Everton derby on Saturday. Reuters -
Palestinians wounded in the bombardment of Gaza are taken to Al Asa Hospital in Deir Al Balah. AP -
Rescuers search for victims and survivors in buildings destroyed by air strikes in Khan Younis, Gaza. Getty -
Residents of Tel Aviv show support for the families of hostages being held in Gaza by Hamas. Reuters
We need to go beyond, to postwar stabilisation, recovery and reconstruction from the destruction wrought by the war and prewar economic legacy. It took 20 years after the Lebanese civil war for real GDP to recover to its prewar level, seven years in Kuwait after the Gulf War.
In the case of Gaza, there is still no consensus what a postwar Gaza would look like. With its economy intrinsically tied to Israel, and the lack of its own (or stand-alone) fiscal, financial or infrastructure resources begs the question of how postwar recovery would be undertaken.
This is a time to develop a new vision for the Mena region. In a multipolar world, the Arab world needs to take the initiative to set up an Arab Bank for Reconstruction and Development (ABRD), backed by the GCC.
Unlike other regions, Mena lacks a regional development bank. This is the historic moment to set up the ABRD given the need for reconstructing places already devastated by war and violence, such as Palestine, Iraq, Syria, Lebanon, Libya, Sudan and Yemen.
The ABRD would be set up by the region’s sovereign wealth funds and existing development funds.
Prior to the latest Israel-Gaza war, a rough estimate of the cost of development and reconstruction of the region’s countries destroyed by war and violence was upwards of $1.5 trillion, to which must be added the massive costs of reconstructing Gaza.
Nasser Saidi is the president of Nasser Saidi and Associates. He was formerly Lebanon's economy minister and a vice-governor of the Central Bank of Lebanon
