Anyone who has seen the pictures of the north of Israel going up in flames will find it difficult to put them out of their minds. Acres of plantations, farms, chicken runs, beehives, pasture, and vineyards have been completely burned. People have seen their life’s work destroyed. Small businesses in the north have been collapsing for months. Technology companies have fled to the center. Since October 7 there has been no tourism, and industry is running on fumes.
It will take decades to rehabilitate agriculture in the region. Factories in which millions have been invested to make them harbingers of the future are devastated. After a decade of unprecedented economic growth in the Upper Galilee, the blow it has sustained sometimes seems mortal. Shooting has become a daily routine. "Everything is burned, physically and psychologically," says a resident of Kibbutz Kfar Szold in the Hula Valley who saw Kiryat Shemona in flames yesterday.
This bonfire has huge economic costs. Many households have suddenly dropped below the poverty line. According to figures presented at the Galilee Panhandle Conference by Dr. Ayala Cohen of Tel Hai College. 82% of the self-employed people in the region have reported medium to high damage to their incomes. 73% report a bad economic situation. 39% of salaried employees report the same. In the Eastern Galilee Regional Cluster, there are 8,227 job seek, half of them on unpaid leave, and that is just a single, small indicator.
Haim Kamin, CEO of Cold Storage Kerur Galil, is liable to find himself unprofitable for the first time in the history of the factory, located in the northern part of Kiryat Shemona. The company has lost an important customer, the Pri Galil food company, which has announced its closure, and there is fear for the future, with many of the kibbutzim in the area still evacuated, and no certainty about what will happen to their crops.
Besides the harm to agriculture and industry, according to Upper Galilee Regional Council chairperson Giora Salz 95% of the companies that have located in the upper Galilee in recent years, many of them in foodtech, agtech, and high-tech, have left for the center of the country, and it is doubtful whether they will return. Many people are still on reserve duty in the IDF and in security details. There is insufficient protection. He describes children lying on the floor and covering their heads with their hands when their settlements are fired at as a daily occurrence.
Despite the catastrophe, the financial markets in Israel seem unmoved. The shekel has been fairly strong lately. After the shekel-dollar exchange rate rose above NIS 4/$ at the beginning of the war, it is now around NIS 3.7/$, while the main Tel Aviv Stock Exchange indices have risen almost 3% in the past month.
Bank Hapoalim chief financial markets strategist Modi Shafrir explains that the markets have apparently become used to the war in the north, hard as it is to say so. "As long as we don’t see a deterioration into all-out war and firing on the center of the country and other areas, we’ll see containment on the part of the financial system," he says.
Shafrir explains this by the fact that the Israeli economy appears to be continuing to function. "As long as the markets are working properly, the fighting in the north will have a limited impact. An attack on the center of the country, on the other hand, such as will drag us into all-out war, will be liable to bring in train a strong reaction from the markets."
Mizrahi Tefahot Bank chief strategist Yonie Fanning says that the market is looking for reasons for optimism from the southern front, and so "the reaction to what is happening in the north is only partial." Fanning explains that despite the severe events in the north of the country, the markets currently see a low likelihood of a broad regional war in the north. "After the attack by Iran in April and the Israeli response, the markets do not expect all-out war in the Middle East."
The oil market tells a similar story. If Brent Crude was at about $90 a barrel at the time of the Iranian attack, it is now in continual decline, and has reached $76 a barrel, a five-month low.
So despite the escalation, Fanning explains, the fear of all-out war has receded. Moreover, he says, the fiscal situation in Israel is of greater concern to the markets. The latest estimate form the Ministry of Finance is that the fiscal deficit will exceed the original forecasts by some NIS 55 billion, which means that debt:GDP targets will not be met.
Published by Globes, Israel business news - en.globes.co.il - on June 5, 2024.
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