Economic Losses of 14 Trillion Won for Neighboring Middle Eastern Countries Due to Israel-Palestine Conflict

An analysis has revealed that the economic losses Arab countries surrounding Israel and Palestine will suffer due to the armed conflict amount to $10.3 billion (approximately 14 trillion KRW).

The United Nations Development Programme (UNDP) stated in its report titled "The Socio-Economic Impact of the Gaza Crisis on Neighboring Arab Countries," released on the 13th (local time), that the ongoing war will reduce the gross domestic product (GDP) of three neighboring countries?Lebanon, Egypt, and Jordan?by 2.3%, and push 230,000 people into poverty.

If the war, which began on October 7, prolongs and lasts up to six months, the economic losses in neighboring countries are expected to double, and the number of people falling into poverty will increase to 500,000.

Amid ongoing clashes between Israel and the Palestinian armed faction Hamas, residents gathered near an ambulance in Rafah, southern Gaza Strip, on the 12th (local time) to monitor the Israeli bombing situation. According to Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization (WHO), Red Crescent medical team members traveling to and from a hospital in northern Gaza Strip on the 9th to transport patients were detained during a checkpoint inspection.
[Image source=AFP Yonhap News]
Photo by AFP Yonhap News

The report, jointly prepared by UNDP and the United Nations Economic and Social Commission for Western Asia (ESCWA), assumed two scenarios of the war lasting three months and six months, using economic modeling tools to simulate the impact primarily on the three neighboring countries.

As a result, if the war ends this month, the third month, the cost to the three neighboring countries is estimated to reach $10.3 billion, equivalent to 2.3% of their GDP. Accordingly, an additional 230,000 people will fall into poverty, and development could regress by 2 to 3 years, the report predicted.

If the war continues for six months, the economic losses in the three neighboring countries will nearly double to $18 billion (approximately 24 trillion KRW, 4% of GDP). The number of people falling into poverty is also expected to rise to 500,000. The report warned that if the damage from the war spreads beyond the Gaza Strip to the surrounding region, the economic costs will increase exponentially.

The three Arab countries bordering the Gaza Strip and Israel?Lebanon, Egypt, and Jordan?are already facing severe economic difficulties, including fiscal pressure, low growth, and high unemployment rates.

Abdalla Al-Dardari, UN Deputy Secretary-General and Director of UNDP's Arab States Regional Bureau, who led the preparation of this report, pointed out that "(this war) is like throwing a bomb into an already vulnerable regional situation." He emphasized, "Amid severe economic hardships caused by the COVID-19 pandemic and the aftermath of the Ukraine war, the shock of the Israel-Palestine conflict has been added. Immediate humanitarian ceasefire and urgent measures to build socio-economic resilience are necessary."