Israeli bank Hapoalim has estimated the cost of the current military operation against Hamas at 27 billion shekels (€6.5 billion). This is equivalent to 1.3% of Israel’s GDP in 2022. Other sources consider this amount to be an underestimate: it will have to be at least double that, given the damage caused, reconstruction, compensation and aid for the most vulnerable sections of the population.
With a defence budget of $15 billion and US aid of $3.8 billion, Israel has the means to wage war, but “everything will depend on how the money is distributed”, says Hapoalim. Israel can also count on its large foreign exchange reserves: 200 billion dollars. The Central Bank has already released 30 billion dollars to support the shekel and provide the government with liquidity.
Nonetheless, the war will have a negative impact on economic activity, which has hitherto been fairly buoyant, with growth of 3.1% in 2023. “The main sectors affected will be agriculture, which is important in the south of the country, and of course tourism”, according to Hapoalim’s assessment. The mobilisation of 300,000 reservists will also reduce economic activity.