In the last three months of this year, Israel’s gross domestic product may shrink by 11% year-on-year amid the escalation of the war with Hamas, estimates American bank JPMorgan Chase & Co., reports Bloomberg.

The American bank’s initial forecasts of the economic impact of the war that broke out on October 7 were “overly optimistic”, according to JPMorgan analysts in a report dated October 27, according to Agerpres.

These new forecasts came about 24 hours after Israel launched a ground invasion of Gaza, and Israeli Prime Minister Benjamin Netanyahu warned that a “long and difficult” campaign lay ahead, according to Bloomberg.

This is the most pessimistic estimate published by a major Wall Street bank. But investors also sold Israeli assets en masse, with the Tel Aviv Stock Exchange’s main index down 1% since October 7 and the Israeli currency falling to its lowest level since 2012.

The forecast for an 11% contraction in the period October-December 2023 is a single compared to the third quarter and adjusted for seasonal factors. In general, JPMorgan analysts are betting on the growth of Israel’s GDP by 2.5% this year, and by 2% in 2024.

However, “risks are directed downwards”, analysts warn. They add that “assessing the impact of the war on Israel’s economy remains a difficult task, both because of the very high uncertainty about the scope and duration of the conflict, and because of the lack of detailed data.”

Israel’s recent conflicts, including a 2014 conflict with Hamas that lasted just a few weeks and included a ground attack on the territory, and a 2006 war with Hezbollah, have “barely affected economic activity,” analysts said.

But “the current war has had a much greater impact on domestic security and trust,” according to JPMorgan experts.

The number of dead already exceeds that recorded in the previously mentioned conflicts. In addition, the Netanyahu-led government has mobilized approximately 350,000 reservists, the largest number in Israel’s history since the start of the war. This is a figure equivalent to 5% of Israel’s workforce.