IDF soldiers fighting Hezbollah terrorists in Lebanon. (IDF)
Israel’s defense spending at 8.4% of GDP is only second to Ukraine which has allocated approximately 23% of its GDP to security due to the ongoing Russian invasion.
Israel has shouldered an unprecedented economic burden in its fight for survival, spending 112 billion shekels ($31 billion) on defensive military operations in Gaza and Lebanon during 2024 alone.
According to Finance Ministry figures released Monday, overall defense spending for 2024 reached 168.5 billion shekels, which encompasses both the Gaza and Lebanon operations plus regular defense expenditures for military salaries, maintenance, training, and other security needs.
Prior to the October 7 Hamas attacks, Israel’s economy had been on relatively stable footing despite some political tensions.
Economic growth forecasts for 2023-2024 had projected around 3 percent expansion, with a healthy labor market boasting a low unemployment rate of 3.5 percent.
Inflation expectations were moderate at approximately 3.8 percent, and the government’s fiscal deficit stood at a manageable 1.5 percent of GDP.
Instead, Israel’s economy grew just 0.9% in 2024, while the budget deficit expanded to 6.8% of GDP. Business GDP declined by 4.8 percent in recent quarters, with exports falling by 8.1 percent and imports of goods and services dropping by 9.8 percent.
The Finance Ministry has been forced to reconfigure the national budget multiple times, increasing the 2024 allocation by 21% from the pre-war approved budget of 513.7 billion shekels to 620.6 billion shekels.
Israel’s defense spending at 8.4% of GDP is only second to Ukraine which has allocated approximately 23% of its GDP to security due to the ongoing Russian invasion.
To help cover wartime costs, Finance Minister Bezalel Smotrich has raised the cost of living across the board, leaving millions of citizens watching their take-home pay shrink as National Insurance payments climb by 1,000-2,000 shekels yearly.
While VAT increases from 17% to 18%, families simultaneously face a wave of utility hikes – electricity surging 3.5%, water rates rising 2%, and property taxes climbing 5.2% in most cities, with Jerusalem targeting newer buildings for even steeper increases.
Meanwhile, approximately 2.76 million Israelis struggle with poverty, including 678,200 families and 1.24 million children. At 28.6%, Israel’s poverty rate nearly doubles the United States’ 17.8% and more than triples Germany’s 9%.
The proposal also calls for expanding Israel’s domestic defense industry and increasing local weapons production.
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