Gaza war to cost neighbouring Arab countries $10bn this year, says UN

Lebanon, Egypt and Jordan face 2.3% GDP loss, which can double in six months

Smoke rises after Israeli bombardment in the village of Tair Harfa in southern Lebanon, near the border with Israel. AFP

The economic cost of the Israel-Gaza war for neighbours Lebanon, Egypt and Jordan could amount to $10 billion this year and push more than 230,000 people into poverty, a UN study has found.

The three Arab countries are facing fiscal pressures, slow growth and steep unemployment. This has deterred much-needed investment into their economies and hit consumption and trade.

The study undertaken by the United Nations Development Programme, said the cost of the war for the three countries in terms of loss of GDP could reach $10.3 billion or 2.3 per cent, and double if it lasts another six months.

"This is a massive impact," Abdallah Al Dardari, UN assistant secretary general and UNDP's Director of the Regional Bureau for Arab States, who lead the study, told Reuters.

"The crisis was a bomb in an already fragile regional situation ... it soured sentiment with fear of what could happen and where things are going."

Economic repercussions are already being felt. Retailers in Jordan reported recent Black Friday sales were significantly weaker than hoped for, while the country has been in the grip of industrial action in protest over Israel’s actions in Gaza.

Tour operators in Jordan, where tourism comprises more than 10 per cent of GDP, report a fall in bookings since the Gaza war began.

The IMF warned earlier this month that tourism could be particularly vulnerable if the conflict spreads, as it has done in recent weeks, with a surge in attacks on ships in the Red Sea and Hezbollah-Israel border clashes.

“Amid concerns about the threat of escalation, visitors have been cancelling travel to the region, hitting hard the very lifeline of these economies,” the IMF said. "Tourism, which accounted for 35 per cent to almost 50 per cent of goods and services exports in these economies in 2019, is a critical source of foreign exchange and employment.

“Tourism-dependent economies like Lebanon, where hotel occupancy rates fell by 45 percentage points in October compared to a year ago, will see knock-on effects for growth.”

Tourism in Lebanon used to account for about 20 per cent of GDP but plummeted during Covid and struggled to recover to 5 per cent of GDP due to the country’s sharp economic collapse and subsequent instability.

But until the Gaza war, it was undergoing a steep recovery, according to The Economist.

Overall, economic activity in the region “was already expected to slow, falling from 5.6 per cent in 2022 to 2 per cent in 2023”, the IMF warned.

Israel launched a ground and air offensive on Gaza on October 7, in which more than 18,400 people have been killed to date, according to Palestinian health authorities, mostly women and children, and wounding more than 50,000.

Thousands more are buried under the rubble or beyond the reach of ambulances.

Israel claims it wants to annihilate Hamas, which controls Gaza, but its campaign has drawn international condemnation for indiscriminate attacks against civilians.

'Unprecedented' scale of destruction

Mr Al Dardari said the scale of destruction in Gaza within such a short period of time is unprecedented, at least since the Second World War.

"To lose 45-50 per cent of all housing in one month of fighting ... we have never seen anything like this, the relationship between destruction level and time, it's unique," he said.

The mass displacement of almost 80 per cent of Gaza's population since October 7 has surpassed the more than decade-old Syrian civil war, which sparked the world's biggest refugee crisis.

"It took Syria five years of fighting to reach the same level of destruction that Gaza reached in one month," said Mr Al Dardari, former deputy prime minister for economic affairs in the Syrian government.

Mr Al Dardari, an expert on reconstruction in conflict zones, said his team was already reaching out to development funds and multilateral financial institutions on postwar rebuilding scenarios for Gaza. "We are not waiting until the battles end ... this effort has begun," he said, without elaborating.