Israel Faces Inflation and Housing Shortages as a Result of Ongoing Conflict

By Thea Felicity

Jun 11, 2024 12:54 PM EDT

Israel Declares War Following Large-Scale Hamas Attacks
DF soldiers guard near a waving Israeli flag outside Kibbutz Kfar Aza where dozens of civilians were killed days earlier in an attack by Hamas militants on this near the border with Gaza, on October 10, 2023 in Kfar Aza, Israel. Israel has sealed off Gaza and conducted airstrikes on Palestinian territory after an attack by Hamas killed hundreds and took more than 100 hostages.
(Photo : Alexi J. Rosenfeld/Getty Images)

In the town of Ofakim, near Gaza, Yahoo Finance reported that Israeli residents have felt the harsh reality of economic fallout, as housing shortages and skyrocketing rents increase due to the ongoing conflict that has persisted for eight months.

In the same report, the said conflict now has triggered a domino effect on Israel's economy. As tens of thousands fled from border areas following attacks by Hamas, the housing market took a hit, with a nearly 5% overnight reduction in available housing. 

This setback comes at a time when Israel's pre-war cost of living already ranked as one of the highest among OECD countries.

For many evacuees, temporary accommodations have turned into long-term leases, worsening the housing shortage. 

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Israel Economy

Despite an initial shock that temporarily stabilized inflation, a resurgence in domestic demand is moving the prices upward, affecting everything from groceries to travel.

With unemployment returning to pre-pandemic lows and wages growing 8% in the early months of 2024, the strain on prices is further compounded by increased taxes and utility costs.

The Finance Ministry anticipates inflation to reach 3.3% by year-end, a major deviation from earlier forecasts in a VCPost report. Housing, transportation, and food, comprising over half of Israel's consumer price basket, are the primary contributors to this surge.

The conflict's impact on food prices has been particularly acute, with a 2% increase observed in the early stages of the war. Scarce access to agricultural land, export disruptions, and rising transportation costs have further exacerbated the situation.

These price pressures have also permeated other sectors, with restaurant prices witnessing a consistent 3% increase monthly. Similarly, the aviation industry is experiencing challenges, with a reduction in international carriers and a consequent surge in air ticket prices.

Supply shortages, as Israel bans Palestinian workers, suggest that recovery may take years for the country to bounce back.

READ MORE: Colombia Freezes Coal Exports to Israel Over Gaza Conflict, Announces Petro

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