The Israeli economy faces accumulating structural pressures

An analysis of the Israeli economy facing accumulating structural pressures after three years of war, with the security budget rising from 63 billion shekels in 2023 to over 142 billion in 2026, and cuts to civilian budgets.

The repercussions of the wars Israel has waged over the past three years are beginning to reflect more clearly on its economy, with military spending more than doubling from its pre-war level. The net original budget of the Ministry of Security before the war was about 63 billion shekels in 2023, then gradually increased during the war years to exceed 142 billion shekels in the 2026 budget, after adding more than 30 billion shekels to cover new security needs. The security burden on the economy also rose from about 4.2% of GDP in 2022 to levels exceeding 8% during the war. The government succeeded during the war years in financing the increase by cutting billions of shekels from civilian budgets, alongside increasing pressures on the labor market. The article points to deeper economic and demographic transformations that may limit the economy's ability to maintain high growth rates and provide the resources needed to finance security and military burdens, alongside the continuation of occupation and settlement.