The war is draining the Israeli economy, doubling security expenditures and indicating a deep recession

Tel Aviv - Ofoq News - In an analytical article published by the Israeli website “Telem” by the writer “Youssef Zeira”, the hidden face of the Israeli economy was revealed in light of the ongoing war since October 2023.

The article refuted the official and media narrative that promotes the “resilience of the economy” and the recovery of the stock market, stressing that these data are superficial and misleading, and are being used as a cover to justify the continuation of the war and the expansion of its fronts, while the actual economy suffers heavy losses.

Security expenditures doubled and a historic jump in the deficit

The article explained that the direct cost of the war led to Israeli security expenditures nearly doubling, rising from about 4% of GDP to about 7.5%. This increase translates into an annual increase estimated at 55 billion shekels, equivalent to an additional burden of 5,000 shekels per person, and 15,000 shekels per family annually.

The public deficit also jumped in an unprecedented manner. After it was only 1.8% in 2022, it jumped to 7.1% in 2023, and reached 9% in 2024, with expectations that it will reach 6.5% in 2025. Because of this aggressive spending, public debt rose from 60.5% to 68.5% of the GDP.

Weak classes bear the brunt

To finance this huge deficit, the writer pointed out that the government preferred to resort to debt, raise indirect taxes (such as value-added tax), in addition to reducing spending on civil public services such as health and education. The article warned that this “neoliberal” policy places the greatest burden on low-income classes, while protecting high-income earners from paying direct taxes (such as income and corporate taxes).

Deep recession and hidden costs

The crisis is not limited to the direct budget, but extends to the indirect cost represented by the decline in demand and the deepening of the economic recession. The writer pointed out a third, “hidden” cost that is not visible on stock market screens, which is the loss of human capital and high risks that deter investments, which inflicts long-term losses on the domestic product due to the continuation of the conflict.

A “narrow” or “broad” conflict?

Despite the bleakness of the current financial scene, the report made clear that military spending did not reach the terrifying historical levels that followed the 1967 war (when it exceeded 20% and then 30% of output). The writer attributed this to the nature of the current battle; Today, Israel is engaged in a “narrow conflict” that depends on fighting factions (such as Hamas and Hezbollah) that rely on militias and does not have regular armies with heavy weapons such as tanks and aircraft, compared to the “broad conflict” that it fought in the past against the armies of major Arab countries.

The article concludes that the government's continued praise of the economy's resilience and the rise of the stock market is nothing but an illusion that hides a debt crisis, a growing recession, and severe financial burdens that future generations and the working classes will pay for for many years.