For the first time in more than five years, Israel’s economy contracted during the third quarter as growth was hit by the effects of last summer conflict with the Gazan terror group Hamas.
Gross domestic product fell 0.4 percent in the July-September period, the Central Bureau of Statistics said.
The 50-day Operation Protective Edge against the Islamist group, which saw a steady stream of Hamas rockets fired at Israeli cities, came as Israel’s economy was already slowing.
It was the first quarterly decline since a 0.2 percent drop in the first three months of 2009, at the outset of the global financial crisis.
“We are talking about a one-time result and will not have a long-term impact,” the Finance Ministry said in a statement.
The Finance Ministry said despite the weak third quarter it maintains a 2014 economic growth estimate of 2.4 percent and a forecast of 2.8 percent for 2015.
To offset the expected weakening of economic growth, coupled with a shift to deflation, Israel’s central bank had lowered its benchmark interest rate by a combined half-point in July and August to an all-time low of 0.25 percent. Policymakers left the key rate unchanged at their two subsequent meetings.
The conflict with Hamas also decreased tourism substantially. Israel was set to have a record year in tourism, but is now projected to register a 7% drop in tourist entries. In October alone, 19% fewer tourists came to Israel in comparison with the same month the previous year.