The shocking cost of war: This is how much the Hamas and Hezbollah wars cost Israel

This includes 112 billion shekels ($31 billion) spent on military operations in Gaza and Lebanon, as well as regular defense costs such as salaries, training, and equipment maintenance.

According to the Israeli Ministry of Finance, defense spending for 2024 surpassed expectations, reaching a total of 168.5 billion shekels. The government had initially anticipated a defense budget of 513.7 billion shekels, but the war forced a 21% increase, bringing the total national budget for 2024 to 620.6 billion shekels.

Before the October 7 Hamas attacks, Israel’s economy had been on a relatively stable trajectory, with growth projections of 3% for 2023-2024. The labor market was healthy, with low unemployment at just 3.5%, and inflation was projected to hover around 3.8%. However, the impact of the conflict has been stark. Economic growth for 2024 has been limited to just 0.9%, while the fiscal deficit has ballooned to 6.8% of GDP. In addition, business GDP has contracted by 4.8%, and exports have dropped by 8.1%, while imports of goods and services have fallen by 9.8%.

The situation has prompted the government to rework its national budget, adjusting allocations for defense and increasing public costs across the board. Finance Minister Bezalel Smotrich has raised taxes and utility costs, leading to an increase in the cost of living for millions of Israelis. National Insurance payments have surged by 1,000-2,000 shekels annually, VAT has risen from 17% to 18%, and utility bills have been hiked for electricity, water, and property taxes. These increases have compounded the financial strain on citizens, particularly those already struggling with poverty.

Currently, approximately 2.76 million Israelis live in poverty, including 678,200 families and 1.24 million children. With a poverty rate of 28.6%, Israel’s situation is significantly worse than that of the United States and Germany, where the poverty rates are 17.8% and 9%, respectively. The combination of ongoing conflict and rising costs has left many Israelis facing an uncertain future as the war with Hamas and Hezbollah continues to ravage the nation’s economy.