Israel’s economy suffered one of its worst slumps after the Hamas war paralysed businesses, forced people to evacuate their homes and caused the military to call up hundreds of thousands of reservists.

Gross domestic product shrank by an annualised 19.4% in the final three months of last year, in seasonally adjusted terms, according to preliminary figures released on Monday.  

Starmer urges end to Gaza fighting as UK vote on ceasefire looms

UK opposition leader Keir Starmer said the “fighting must stop now” in Gaza, as he prepared for another sensitive Parliament vote this week that could reignite tension in his Labour Party.

“Any ceasefire cannot be one-sided,” Starmer told the Scottish Labour conference in Glasgow on Sunday. “It must stop all acts of violence, on both sides, it must lead to a genuine peace process.”

The remarks were made as the Scottish National Party prepared to propose a motion in the House of Commons calling for an “immediate ceasefire” in the Israel-Hamas war. MPs will vote on the motion on Wednesday and though non-binding, it poses trouble for Starmer as a similar vote in November led to a rebellion by dozens of his legislators. The SNP is running neck-and-neck with Labour in Scottish polls. 

Ever since Hamas’s October attack on Israel, Starmer has been battling to keep his party aligned. He’s resisted pressure from some Labour MPs to call for an “immediate” ceasefire, arguing the term implies unilateral and unconditional, which he has said would deprive Israel of its right to defend itself and leave Hamas in a position to launch further attacks. 

It’s a stance designed to align with the UK’s official position and to present Labour — which has a commanding lead in UK-wide surveys ahead of a general election later this year — as a legitimate government-in-waiting. It also reflects his desire to showcase how much the party has moved on from the era of his predecessor Jeremy Corbyn, which was dogged by accusations of anti-Semitism.

Yet it has angered some within Labour, which traditionally has strong support among British Muslims. Starmer has faced criticism at pro-Palestinian rallies in London and other cities, while last week the party dropped campaign support for its candidate in Rochdale, northern England, after he was recorded sharing an anti-Semitic conspiracy theory about the 7 October Hamas attack. 

In his speech on Sunday to the Scottish Labour conference in Glasgow, Starmer still didn’t use the term “immediate” ceasefire. He reiterated that any ceasefire must be permanent, “not just for a pause”. He also said that Israel’s threatened offensive in the Rafah area of Gaza “cannot happen.”

“This cannot become a new theatre of war,” Starmer said. 

Israel’s economy contracts by nearly 20% after outbreak of war 

Israel’s economy suffered one of its worst-ever slumps, after the Hamas war paralysed businesses, forced people to evacuate their homes and caused the military to call up hundreds of thousands of reservists.

Gross domestic product shrank by an annualised 19.4% in the final three months of last year, in seasonally adjusted terms, according to preliminary figures released on Monday. That was worse than every estimate in a Bloomberg survey of analysts, whose median forecast was for a decline of 10.5%.

The shekel weakened slightly on the news and was trading 0.4% down at 3.62 per dollar at 3.53pm in Tel Aviv, heading for its first drop in four days. Stocks initially pared advances.

“The release highlights the degree to which the Israeli economy has been affected by the conflict, particularly on the private activity side,” Goldman Sachs Group economists Tadas Gedminas and Kevin Daly said in a report.

Though the war broke the economy’s momentum toward the end of 2023, GDP still expanded by 2% in the full year, matching the projection by the central bank’s research department. The Bank of Israel’s growth estimate for 2024 is the same at 2%, while the Finance Ministry sees it at 1.6%.

The assessment is the first official tally of the war’s toll on GDP and captures the extent of the disruption that tore through the $520-billion economy in the aftermath of Hamas’ attacks on 7 October. 

Alongside the call-up of reservists that depleted roughly 8% of the workforce, it led to restrictions comparable to shutdowns imposed during the Covid-19 pandemic, causing a sudden crash in manufacturing, jolting consumption and briefly emptying schools, offices and construction sites. 

Economic shockwaves from the war have been far more devastating in Palestinian territories, adding to the humanitarian crisis unfolding in Gaza. The International Monetary Fund has said the Mediterranean enclave saw “an almost complete collapse of activity” in the fourth quarter, estimating that cumulative GDP in Gaza and the West Bank plunged by 6% in 2023.

Iran-backed Hamas, which is designated a terrorist organisation by the US and the European Union, killed 1,200 people and abducted around 250 when its militants broke out of Gaza and rampaged through southern Israel on 7 October. 

Israel’s retaliatory offensive has killed some 29,000 people in Gaza, according to health officials in the Hamas-run territory. Israel has said it will launch a ground offensive on the Gaza city of Rafah unless hostages still held by Hamas are released soon. DM