Bank of Israel estimates war costs at 350 billion shekels
The Bank of Israel estimates that the ongoing war has cost the economy 350 billion shekels, with public debt rising to nearly 70% of GDP. Economists warn that the next government faces severe fiscal constraints and must navigate high defense spending alongside long-term structural economic challenges.
Why it matters
The fiscal strain on Israel's economy illustrates the long-term financial consequences of prolonged regional conflict on national development.
--> In Israel, the next government will inherit an economy with wartime fiscal expenditures of around 350 billion shekels in 2023–2026 and public debt approaching 70% of GDP. About half of these expenses were financed through borrowing, the Jerusalem Post reports , citing estimates by the Bank of Israel.
At the end of 2025, public debt stood at 68.5% of GDP, compared with 60.5% at the beginning of 2023, while the budget deficit reached 4.7% of GDP. The central bank also calculated that from the start of the war through the end of 2025, the country’s economy produced approximately 177 billion shekels less than it could have under different circumstances.
Before the war, Israel’s defence spending amounted to about 4.5% of GDP. According to the International Monetary Fund’s estimate, it increased to around 8% of GDP in 2025 and may remain close to 6% of GDP in 2026.
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