The chief of Israel’s central bank said on 30 May that the cost of the ongoing war in the Gaza Strip will amount to nearly $70 billion of the Israeli budget for 2025.
“The costs of the war, by 2025, will reach NIS 250 billion (approximately $67.4 billion),” said central bank head Amir Yaron at an economic conference on Thursday.
“There is no doubt that more expenses will be needed, since the economy needs security and security needs the economy. However, it is important to emphasize – you cannot give an open check on the issue of security spending, you must find the right balance between things,” Yaron added.
“The defense and civilian costs amount to hundreds of billions of shekels – it is a heavy burden … The country’s risk premium increased while the excess devaluation of the shekel continued, with devaluation of course leading to price increases.”
The significant boost in defense spending has played a major role in the mounting costs.
Manuel Trajtenberg, a professor from Tel Aviv University’s economics department, warned that Israel “may slide back into another lost decade” if it does not lower its defense-spending-to-GDP ratio, referring to a period of economic decline following the 1973 Arab–Israeli war after which Israel spent years trying to balance between its defense and development spending as a result of the costs of that war on its economy.
The central bank chief’s comments came a day after Tzachi Hanegbi, head of Israel’s National Security Council, said that another seven months of fighting is expected to take place in the Gaza Strip, where Tel Aviv has yet to achieve its stated goal of eradicating Hamas and returning its captive prisoners.
Israel’s economy has taken significant losses as a result of the war.
Its gross domestic product (GDP) plummeted nearly 20 percent in the final months of 2023, according to statistical data released in February.
Hellbound and Down 