Israel’s months-long war against Hamas in the Gaza Strip is hurting the country’s economy more than expected, according to new government data, as the military call-up of reservists puts a damper on tourism, spending, and investment.

The country’s economy shrunk at an annualized rate of 19.4% in the final quarter of 2023, Israel’s Central Bureau of Statistics said Monday. That contraction of gross domestic product in the country’s roughly $500-billion economy was double what analysts had expected, Reuters reports.

The Oct. 7 Hamas attack in Israel that killed about 1,200 people and left more than 200 others held hostage was followed by an Israeli military campaign in Gaza that has now killed more than 29,000. Prior to that, Israel’s economy was expected to grow by about 3.5% in 2023.

But with the war effort into its fourth month, the call-up of thousands of military reservists, the displacement of tens of thousands of Israelis from border communities near Lebanon and Gaza because of rocket attacks, the drying up of tourism spending, and the disruption to the country’s vaunted technology sector have taken a growing toll.

Moody’s downgraded Israel’s credit rating earlier this month, warning that the ongoing war in Gaza and a possible war with Hezbollah in Lebanon could adversely affect the country’s economy. It was the first time Moody’s has lowered Israel’s credit rating. And it prompted a rebuke from Israel’s finance minister, who said it “reflects a lack of confidence in Israel’s security and national strength, and also a lack of confidence in the righteousness of Israel’s path against its enemies.”

This article includes information from The Associated Press.

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