The construction site was delayed. The luxury residence, built in Katamon, a former Palestinian neighborhood in West Jerusalem, should have been delivered in May 2024. It will not be delivered before May 2025. “The work was stopped for two months at the start of the war, and since then everything has been complicated, sighs the project manager, who wished to remain anonymous. Our biggest problem? Lack of labor. »
An illustration of the critical economic situation of the country, after more than a year of war. In retaliation for the killing of October 7, 2023 by Hamas members from the Gaza Strip, the Israeli government canceled the work permits of 170,000 Palestinian workers (80,000 of whom were employed in construction), putting them out of work. forced, and forcing nearly 50% of construction sites to close, according to Raul Sargo, president of the Association of Israeli Builders.
Nearly 5,000 Indian and Sri Lankan workers have arrived as replacements since February. “We waste time and money training them in techniques that they have difficulty mastering”deplores this engineer. According to him, the scarcity of workers has already led to a doubling of their salaries.
Construction contraction
“Nothing can replace Palestinian workers. Investors know it, they put pressure on the authorities: today there are plenty of illegal Palestinian workers in Jerusalem, but everyone turns a blind eye, because the economy needs them”underlines the project manager, himself a Palestinian from Jerusalem. A security source told the daily Yedioth Ahronoth in April that 40,000 Palestinians were employed without permits in Israel.
Transversally, the construction sector represents 6% of Israeli GDP. Its contraction has had repercussions on the Israeli and Palestinian economies. “With the exception of consumption, which is growing, all activity is slowing down, or at a standstill: industry, tourism, services, finance, agriculture, and even tech, the engine of Israeli growth »explains Jacques Bendelac, Franco-Israeli economist.
Stagnation in new technologies
Flagship of the Israeli start-up nation, the new technologies sector has also experienced a labor shortage, with the mobilization of 7% of its employees in the Israeli army reserves, according to figures from the Innovation Authority.
In a report, it notes that after a decade of growth, sector indicators have stagnated for more than two years. “Israel is seen as a risky country, explains Alon, employee of a Fintech company This chills investors and penalizes the youngest start-ups”.
“The engines of growth have died down, production is declining and inflation at 3.6% is making daily life difficult for many Israelisexplains Jacques Bendelac, who evokes a risk of recession. There are no surprises. When a war costs this much, the economy grinds to a halt. »
Risk of widening inequalities
According to an estimate by the Bank of Israel, the costs linked to the war between 2023 and 2025 could amount to 55.6 billion dollars (52 billion euros), or 10% of GDP. The budget devoted to defense has been multiplied by two: it went from 60 to 120 billion shekels in 2024 (from 15 to 30 billion euros), or 20% of the state budget. “All these expenses were financed by the public deficit, which today exceeds 8% of the budget. It's considerable », continues Jacques Bendelac.
The 2025 draft budget, which will not be put to a vote before January 2025, plans to reduce this deficit to 4%. “In line with the liberal philosophy that prevails in Israel, it is essentially a question of continuing to cut spending, but above all of raising taxes, in particular indirect taxes such as VAT or housing taxexplains the economist. The 2025 budget is a waiting budget, which does not provide anything for the post-war period. The government has no end in sight. This is very serious for the economy and it is the Israelis, already in great demand, who will pay the price. »
Enough to widen the inequalities of a country which already operates at two speeds, with almost a quarter of the population living below the poverty line. However, economic issues remain far from arousing as much popular anger as the abandonment of hostages or the security failures of October 7.
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