Bank of Israel: Intifada cost the economy NIS 13b

The ongoing intifada has cost the economy an estimated NIS 13 billion, equivalent to 4 percent of the business GDP, the Bank of Israel reported today in an assessment of the October 2000 - December 2001 period. This is the largest estimate of damages incurred by the Israeli economy since the Palestinian uprising began on September 29, 2000. Central bank officials claimed the losses are even greater as they do not take into account the uprising's impact on foreign investments and a decline in private consumption. According to the central bank's research department a 1% loss was incurred in the final quarter of 2000, with the remaining 3% sustained during 2001. The figures correspond to a direct decline of activity in several industries, including tourism, construction and agriculture. Additionally, the Bank of Israel pointed to a substantial decline in exports to the Palestinian Authority. The business atmosphere was also hurt by the political uncertainty caused by the conflict, the bank said. In a breakdown of the affected sectors, the tourist industry had lost some NIS 7.3b. over the 15 month period, equivalent to a 2.2% decline in the business GDP. Tourism accounts for 3.8% of the business GDP. The industry's losses are even great as they represent a 44% loss in value added taxes (VAT) collected for the tourist sector between October 2000 and December 2001. Central bank officials said the devastating blow to tourism followed a period of growth during 1999 to the third quarter of 2000. The tourist industry was hit hardest by the downturn, however and its difficulties increased as a result of the September 11 terrorist attacks on the US, which kept potential visitors at home. The industry would have weathered the global economic slowdown, and local recession if not hampered by the uprising, the central bank said. Exports to the PA, which account for a only 1% of the business GDP, lost NIS 2.1b. and 45.7% of its VAT intake. Since the intifada's start there has also been a sharp drop in imports from the Palestinian territories. The central bank further reported a NIS 2.7b. loss for the construction sector, and a NIS 500 million loss for agricultural firms. Both sectors have been hurt by the ban of Palestinian workers entering Israel. The construction sector alone has seen a 45,000 contraction in its work force, primarily affecting housing starts.