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With its credit rating downgraded for the first time in its history to “A2” with a negative outlook, and while Israel faces the challenges of the current war on Gaza, the economic threats looming on the Israeli economy are growing.
Recent discussions at the Economic Outlook 2024 conference in Tel Aviv revealed a consensus of concern among experts and leaders, highlighting the need for an urgent reassessment of priorities.
With the increasing economic pressures resulting from the escalation of military expenditures, experts believe that focusing on the necessity of financial responsibility and making strategic decisions to protect economic stability in the face of unprecedented challenges is a priority at this stage.
In an opinion article by financial affairs writer Shoshana Tita published in the Israeli newspaper The Jerusalem Post, she expressed her concern about the impact of the ongoing war in Gaza on the economy, and stressed the need for a shift in the government’s priorities.
The article draws insights from a conference in Tel Aviv entitled “Economic Outlook for 2024” where leading experts unanimously agreed that Israel cannot continue with business as usual after October 7.
Israel's military spending has reached 75 billion shekels since the beginning of the war on Gaza (Reuters)
The author highlights the rapid growth that the Israeli economy has witnessed over the past two decades, which contributed to reducing the deficit. However, she says that the current conflict requires a reassessment of priorities due to the significant increase in military expenditures.
In comparison with the critical period of 1974, the author stresses the importance of avoiding a repeat of the lost decade that followed the October 1973 war.
The author proposed a "New Deal" similar to Franklin Delano Roosevelt's initiative after the Great Depression in 1933, with the aim of addressing the large military, economic and social expenses facing Israel.
In the author’s opinion, a demilitarized Gaza in 2024 will require a “Marshall Plan” funded by Europe and the United States, which will ultimately benefit Israel.
She points out the financial pressures caused by the war, and that the cost of each Iron Dome interceptor missile ranges between $50,000 and $70,000. Military spending has already reached NIS 75 billion ($20.4 billion) since the start of the war, with expectations that it could reach NIS 125 billion ($34 billion) this year, excluding a possible large-scale war with Hezbollah in the north.
The author refers to Dov Kotler (CEO of Bank Hapoalim) calling on the government to exercise financial responsibility to finance the escalating military expenditures and reconstruction expenses in southern and northern Israel.
The article conveys the warning of Eyal Ben Simon (CEO of Phoenix Holdings) that Israel entered the year 2024 in weak economic conditions due to misguided economic priorities, stressing the need to make difficult choices at the economic crossroads that Israel faces.
For his part, opposition leader Yair Lapid expressed his concern about the imbalance between the size of the government and the army. He said that maintaining the NIS 25 billion increase in the military budget will require a collective effort from all sectors of the population.
Source: Israeli press