Peace deal could deliver $120bn to Israeli economy, says study
A peace agreement ending the Israeli-Palestinian conflict would deliver an economic boost of more than $120bn to the Israeli economy over the next decade, a study has found.
The Palestinian economy would also in turn gain $50bn over 10 years if a two-state solution were agreed, according to the Rand Corporation’s report.
“In the absolute size of GDP dollar terms, the Israeli economy would be 5 per cent bigger and the Palestinian economy 50 per cent bigger in 2024 if the two parties were to agree a two-state solution,” Charles Ries, co-author of the study, told the Financial Times.
Translated into GDP per head, Israelis would see their income rise by about $2,200 and the Palestinians by $1,000 over 10 years if they were to make peace.
The report’s publication comes at a sensitive time for Israel, amid signs of growing support for the “Boycott, Divestment and Sanctions”, or BDS, movement calling for economic penalties against Israel because of its occupation of Palestinian land.
The Israeli government, worried about the economic and political fallout of BDS, is taking concerted measures to fight it.
The report puts a price tag of the cost of BDS to the Israeli economy of $47bn over 10 years under a scenario of “nonviolent resistance” — one of five outcomes on which the researchers ran a cost-benefit analysis.
“Most of the impact [of BDS] would be on the capital account — forgone investment flows, changes in policies by pension funds and banks, rather than on trade,” Mr Ries said.
The report represents a rare attempt to calculate the economic toll of the long-running conflict on both sides, both in terms of direct costs, such as budgetary spending, and opportunity costs, such as lost investment.
The research was reinforced by an Israeli government report leaked on Monday that put the cost of the BDS movement at $1.2bn a year in lost business. The report also claimed that Israel’s economy stands to lose $300m a year in exports to Europe as more of its trading partners shun goods from Jewish settlements on Palestinian lands. EU officials are weighing new Europe-wide guidelines for labelling settlement-made goods, a prospect that has alarmed the Israeli government.
The figures come more than a year after Israel and the Palestinians abandoned their last round of peace talks. Since then, the two-decade old US-sponsored process has all but died after Israel waged a deadly war against Hamas in the Gaza Strip and Palestinians took unilateral steps to seek recognition and legal redress against Israel in the UN and other international forums.
It is unclear how seriously Israeli officials will take the Rand study, as many economists in the region routinely play down the size of a potential peace dividend that would come from a resolution of the Palestinian conflict, or the normalisation of diplomatic and trade relations with Arab countries.
Israel’s economy is on course to grow by more than 3 per cent this year and last saw a sustained slowdown more than a decade ago during the second Palestinian intifada.
Anticipating the controversy the report may cause, the Rand researchers published a “costs of conflict calculator” that allows users to adjust variables themselves, such as security costs, tourism numbers, or the toll that BDS might take.
The researchers ran through five possible outcomes: a two-state solution, two scenarios for withdrawal, nonviolent resistance by the Palestinians, and a return to violence.
The report makes no prediction as to which course events the region will take.