A report in the French newspaper Le Figaro highlights the ongoing budget crisis in Israel amid the devastating conflict in the Gaza Strip. Israeli Finance Minister Bezalel Smotrich has revealed that the military expenditures related to the war, which began on October 7th, are straining the economy significantly. With over 136,000 casualties reported, including many children and women, the financial implications of the prolonged conflict are becoming increasingly dire.
Smotrich stated that the costs of the war could range between 200 and 250 billion shekels ($54 to $68 billion), emphasizing that without military victory, security and economic stability would be unattainable. The Israeli Central Bank is pressuring the government to clarify its financial policies amidst rising public dissatisfaction over crisis management.
In an effort to mitigate the economic fallout, the Smotrich administration plans to implement budget cuts amounting to 35 billion shekels, aiming to reduce the deficit to 4% of GDP. However, the report suggests that these measures may be temporary and contingent on the evolving situation at the frontlines, particularly with the looming threat of conflict escalation in Lebanon.
The business landscape is also suffering, with 46,000 companies reportedly closing since the onset of the war, and projections indicate that this number could rise to 60,000 by 2024. The construction and agricultural sectors are particularly hard-hit due to a shortage of workers, following the entry ban on Palestinian laborers. Despite these challenges, the Israeli economy is expected to maintain a growth rate of about 1.5%, down from the previously anticipated 3% before the war.
