The direct and indirect financial damage to the Israeli economy from an attack on Iran's nuclear facilities will be NIS 167 billion, BDI estimated today. It estimates the direct damage from an attack at NIS 47 billion, plus NIS 24 billion a year in lost GDP for five years after an attack, due to the collapse of businesses.
BDI uses as a baseline the 32-day Second Lebanon War in 2006, which cost Israeli 0.5% of GDP in lost growth. BDI says that, in addition, the direct costs of that war totaled NIS 8 billion in civilian property damage, damage to infrastructures, and financing the direct costs of the war (rebuilding munitions and fuel stockpiles, etc.)
The combined cost amounted to 0.5% of GDP, plus another 1.3%, for a total of 1.8% of GDP (in 2006, Israel's GDP was NIS 633 billion).
"In the event of a war on the same scale, with the same duration and damage, then it is possible to expect NIS 16 billion in damage," estimates BDI. "However, most of the damage in the Second Lebanon War occurred in the north, which produces only 20% of Israel's GDP. It is reasonable to assume that in the event of a war, it will also include the center of the country, which produces about 70% of Israel's GDP. In 2011, GDP totaled NIS 870 billion, and the cost of such a war is estimated at three times the cost of the last war, or NIS 47 billion."
"This amount is not the final figure," BDI warns, because it only covers the direct cost to the economy of a war. "There is damage which is difficult to estimate, such as the loss of foreign customers and the collapse of businesses (especially small businesses), which could be permanent. A conservative estimate of the collapse of 10% of small businesses (an average turnover of NIS 20 million) as the result of a war (due to the slowdown, lack of financial depth, drop in demand), we estimate the loss of GDP at NIS 24 billion a year for 3-5 years, in addition to the direct damage."
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2012
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