War with Iran Could Cost Economy $42 Billion

A business firm says a war with Iran could cost the economy $42 billion (167 billion shekels) in direct costs and damages over five years.

Tzvi Ben Gedalyahu ,

Hizbullah under Israeli attack in Lebanon
Hizbullah under Israeli attack in Lebanon
Israel news photo: Flash 90

The BDI business information firm estimates that a war with Iran could cost the economy $42 billion (167 billion shekels) in direct costs and damages over five years.

The estimates are based on the cost and resulting damage to the economy from the 34-day Second Lebanon War in 2006, and BDI assumes that a war with Iran will last as long.

The calculations are based on its own research, while a war with Iran – if it happens – could be a lot shorter and less damaging than feared.

BDI stated that its estimates may be conservative.

It figures that there will be direct costs of $12 billion plus another $6 billion a year, over a five-year-period, due to economic repercussions.

The Second Lebanon War cost the country half a percent in economic growth, according to BDI. Direct damage to property and infrastructure, along with the cost of restoring supplies, totaled $2 billion. It estimated that in addition to a loss of half a percent in the gross Domestic Product, the war cost Israel 1.3 percent in production, resulting in a combined loss of $3 billion.

“The cost of a war [with Iran] could be three times as much as the previous one,” BDI said.

“If war breaks out with Iran to the same extent, we can expect [direct] damage of $4 billion,” BDI added. “The brunt of the damage in the Second Lebanon War was felt in the north, which accounts for 20 percent of manufacturing and production in the country. It is reasonable to assume that in the event of war with Iran, it will include the center of the country, which accounts for approximately 70 percent of total production."

BDI pointed out that beyond the direct damage and loss of production, there will be a result of loss of customers from outside the country and from the collapse of small businesses.

"Using a conservative estimate that 10 percent of new and small business will collapse as a result of a war, because of lack of monetary reserves and reduced demand, we estimate that the economy will lose approximately $6 billion a year over a period of 3-5 years” after the war.”