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Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

Gaza War to Cost Israel $67 Billion


Sat 01 Jun 2024 | 07:56 PM
Israa Farhan

The ongoing conflict between Israel and Gaza has become the most expensive in Israeli history, with the Bank of Israel estimating costs to surpass $67 billion by 2025.

A report by Bloomberg compares the current war's economic impact on Israel to the aftermath of the 1973 Yom Kippur War, which led to what is referred to in Israel as the "lost decade" of the 1970s, marked by significant economic challenges due to increased military spending.

Israeli leaders in the 1970s viewed the 1973 war as a critical lesson, prompting a substantial increase in military preparation and expenditure.

Bloomberg notes that the post-1973 period is seen by economists as a cautionary tale. Israel’s insistence on ramping up military spending to around 29% of its GDP from 1973 to 1975 led to severe economic problems, including a government deficit ballooning to 150% of GDP and annual inflation soaring to 500%.

The economic difficulties of the "lost decade" ended in the 1980s when Israel sought external experts to help implement stringent economic reforms.

These reforms reduced government spending, stabilized the shekel, and attracted foreign investment.

While Israel's current economic situation is vastly different, the parallels to the past are causing alarm.

The Bank of Israel projects that the total cost of the Gaza war will reach 250 billion shekels (about $67.4 billion) by 2025. Additionally, the fourth quarter of 2023 saw a 21.7% annual decrease in Israel's economic output.

Prior to the war, military spending had reached an all-time low of 4.5% of GDP. This stark contrast underscores the significant financial strain the current conflict is placing on Israel, highlighting the need for careful economic planning to mitigate long-term impacts.