JERUSALEM (JTA) – Israel’s central bank is reducing its interest rate to an all-time low to counteract a foundering economy due in part to the Gaza military operation.
The Bank of Israel said Monday that it was dropping the rate to 0.25 for September. It marks the second straight month that the rate has been lowered.
Along with the Gaza operation, Bank of Israel Governor Karnit Flug cited the global economic slowdown for the problems in Israel’s economy.
“Our intention in reducing the interest rate is in effect to help the economy strengthen its capability to recover from a weakness it finds itself in both due to the global slowdown and the fighting,” Flug told Israel Radio on Monday.
The Gaza operation has affected nearly all economic sectors of Israel, including tourism, agriculture and manufacturing.
Israel’s Manufacturers Association estimated the total economic impact of the operation on Israeli manufacturers so far to be about $336 million. Israel’s tourism industry has lost at least $566 million after tourism dropped by 26 per cent over last year for the month of July.
In addition, employees of businesses located up to 25 miles from the Gaza border can be paid for days they miss work due to the Gaza situation with government money given to the businesses.
The central bank said in a statement earlier this month that economic activity in Israel began experiencing “a sort of contraction” even before the Gaza operation.
Meanwhile, the Al-Monitor news website reported Friday that sales of Israeli goods in the West Bank are down 50 per cent due to a boycott of Israeli products.
The head of the Palestinian Central Bureau of Statistics, Oula Awad, told Al-Monitor that more than 70 per cent of Palestinian imports come from Israel or through it, and that the Palestinian market is the most important for Israel. Awad said imports from Israel are worth $4 billion to $4.5 billion while exports do not exceed half a billion dollars.
Israel’s Channel 10 had reported earlier this month that sales of Israeli products in the West Bank dropped by 50 per cent due to the Gaza operation.