9/11 proved that economies can be revived despite ongoing wars - opinion

• Published date: 24 March 2024
• Author: DAVID ZAIKIN
• Publication title: Jerusalem Post, The: Web Edition Articles (Israel)

The dark shadow of the 9/11 terrorist attack has shaped the American narrative since 2001. Similarly, the October 7 Hamas attack on Israel has left a scar that will have an everlasting effect on the Israelis

While there is no doubt that such devastating events affect peoples' thinking for decades to come, other effects, such as those on the country's economy are often exaggerated. In fact, while Israel's economy faced an initial shock following the terrorist attack, similarly to the US post-9/11, all signs, as well as historic evidence point to a fast recovery.

Given the magnitude of the October 7th attack, the parallels between the US and Israel's economies in the aftermath of traumatic events is highly relevant. The immediate impact of the 9/11 attack was two-fold. On one hand, patriotic sentiment surged, with a 62% majority saying they had often felt patriotic as a result of the 9/11 attack.

On the other hand, the economy saw a contraction, with the annual GDP growth shrinking by 3% in the first four months of the attack. Yet, both of these changes were short-lived: the economy recovered a year later, while the ''9/11 effect'' on public opinion wore off by 2005.

As we observe the effects of Hamas attacks on Israel, we see a similar effect on the economy. Between October and December of 2023, Israel's GDP fell by 5% in annualized terms. Private spending dropped by 26.3%, exports fell by 18.3% and there had been a 67.8% slide in investment in fixed assets, especially in residential buildings.

Yet, despite the drop in GDP between October and December, Israel's economy still grew by 2% for the full year – smaller than the expected 3.5%, but hardly an insurmountable crisis.

There are several sectors that have felt the greatest economic effects: construction, agriculture, and tourism. Importantly, these sectors experienced significant labor shortages, given that 360,000 people were called out of reserve for active duty, and hence, taken out of the workforce.

It is important to note that currently, the reservists are returning to work, and even though 8% of the workforce was mobilized, the economy did not contract, and only failed to grow at expected levels.

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Yet another sector that is particularly important for Israel and was threatened by the loss of labor is the technology sector. With the field composing 18% of Israel's GDP, the mobilization of young talent in roles that require hi-tech expertise was particularly difficult. About 10% of tech...