Strategic Assessment

Of all the factors responsible for the present state of the Israeli economy, the protracted conflict with the Palestinians plays a key role, though not an exclusive one. The nature of the conflict has changed with time, and the consistent escalation in violence over the past two and a half years has replaced the rhythm of the previous decades, with its recurring cycle of intensification and moderation. At this point, the conflict has reached its current peak, at which the two sides are trying to exhaust each other. The visible economic consequences over the thirty months of escalation in the conflict are a cumulative result of the conflict itself; its long duration, unlike any previous escalation of violence in Israel; and a number of other factors. All these have joined to produce the current recession, which now claims the dubious honor of 50-60 billion shekels ($10-13 billion) in accumulated damages.