Israel has incurred losses of up to 125 billion shekels ($34.09 billion) since the onset of the Gaza conflict on October 7, 2023, according to a report by the Israeli Ministry of Finance.
The war, coupled with rising military expenditures, has significantly strained the nation’s economy and widened its fiscal deficit.
The Ministry revealed a budget deficit of 19.2 billion shekels ($5.2 billion) for December 2023, driven by escalating costs related to military operations in Gaza against Hamas and heightened tensions with Hezbollah in Lebanon.
This has pushed Israel’s fiscal deficit to 6.6% for 2023, while projections for 2024 indicate a further rise to 6.9% of GDP, up from 4.2% the previous year.
Despite increased war spending, Israel reported a notable rise in tax revenues, with a 27.6% increase in December alone and 7.3% growth for 2024.
However, this was not enough to offset the significant financial burden caused by the dual-front conflicts.
The ongoing conflict has cast a shadow over Israel’s economic prospects.
In November, JPMorgan revised its growth forecasts for Israel, lowering its GDP growth estimate for 2024 and 2025 due to the high costs of war and rising geopolitical tensions with southern Lebanon and Iran.
The bank now predicts GDP growth of 3.3% in 2025, down from its earlier forecast of 3.7%.
Similarly, S&P Global Ratings has forecasted economic contraction for Israel this year.
Despite these grim predictions, the Israeli Ministry of Finance and the Bank of Israel remain optimistic about a potential economic recovery in 2025.
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