Prof. Amir Yaron, the governor of the Bank of Israel, has been instrumental in steering Israel’s economy through the challenges posed by the Israel-Hamas war.
The October 7 attack on Israel and the ensuing war have had huge implications for Israel’s economy. Tens of thousands of displaced Israelis, hundreds of thousands of reservists, agricultural and industrial areas near the border made inaccessible by fighting, and limits on foreign workers – alongside significant geopolitical threats against Israel creating large amounts of uncertainty – have all had huge impacts on Israel’s economy. The country’s GDP growth has slowed as its deficit has swelled.
The primary job of Israel’s central bank is to maintain price stability; it is also tasked with supporting the government’s economic policy goals. In order to achieve these objectives during the war, Yaron guided the bank through a series of moves meant to contend with the war’s impacts on the economy.
Stabilizing the shekel
The bank’s primary move was to announce that it would sell foreign currency to stabilize the shekel, as well as take additional steps in the foreign exchange market to maintain price stability.
The BOI also announced a plan that was adopted by Israel’s commercial banks to help Israelis contend with the financial results of the war through mitigating the burden of credit and banking fees on them. It also set in motion a plan to provide loans to small businesses hurt by the war.
Early on, the governor called for a committee to map out the country’s security needs in order to create an appropriate budget. This was a critical step at a time when the country’s security needs have changed and have created economic and budgetary challenges.