PNN – Analyzing indicators such as the fall in credit rating, capital flight, and the budget deficit of the Netanyahu government helps us understand whether the Israeli economy can withstand a long war with Iran.
A question that has been repeatedly asked since the outbreak of direct war between the United States and Israel with Iran is how long can the Israeli economy survives?
According to the report of Pakistan News Network; Tel Aviv’s official statements say that everything is under control, but if you look for reality, you will see a different picture. Israel may be able to survive in the short term with billions of dollars from Washington, but “erosion” is a word that has robbed the central bankers of sleep. It seems that this time, the story of Israel’s economy will be different from all previous wars.
The Well of Israel’s Military Budget: When Missiles Swallow Cash
The recent war should not be judged solely as a military confrontation, as it has pushed the Zionist regime to the brink of an economic abyss. According to estimates by reputable international institutions and leaked data from the 2026 budget, Israel’s military spending has reached previously unimaginable figures.
The 7% budget deficit crisis and the Netanyahu government’s borrowing impasse
Israel’s budget deficit, previously controlled at 3 or 4 percent, has now risen above 7 percent. This means the government is spending more than it earns. To fill the gap, they have been forced to borrow. The debt-to-GDP ratio, a measure of economic health, has jumped from 60 percent to nearly 72 percent.
Israel’s credit rating downgraded; why do global banks no longer trust Tel Aviv?
Rating agencies like Moody’s and Fitch are no longer as kind to Israel as they once were. A downgrade sends a simple message that it has become more expensive for Israel to borrow. When the world doubts your ability to repay your debt, it raises interest rates, which means a large portion of Israeli taxes, are being spent on war loans instead of welfare.
Paralyzing the production wheel; emptying the Israeli labor market by the reserve army
Israel’s major weakness in long wars is its workforce structure. The Israeli military model is based on reservists. This means that when a war starts, software engineers, truck drivers, and doctors must suddenly put on combat gear and head to the front.
The evacuation of knowledge-based companies should not be underestimated, as the technology sector, which is the driving force behind the Israeli economy, will be forced to stop producing knowledge and wealth due to the mandatory call-up of 10 to 15 percent of its forces to the barracks.
Traces of the crisis are also visible in the construction and agricultural sectors, especially after we learn that construction projects have practically come to a standstill with the departure of Palestinian workers and the reverse migration of foreign forces. Stagnation and inflation occur in such situations, leading to an increase in housing prices.
Crisis in the tech hub: Why did the engine driving Israel’s economy fail?
Investors in the occupied territories are like birds, flying away as soon as they hear a gunshot. The Israeli economy is heavily dependent on foreign investment.
Billions of dollars in capital outflow; wave of startups leaving Israel
In recent months, there have been numerous reports of Israeli startups moving their headquarters to Cyprus, Greece and the United States. The executives of these companies say they cannot guarantee that their global clients will be completely safe from missile attacks. It will likely take decades to bring back foreign investors and the wealth they take with them.
Blocked sea routes and double-digit inflation in Israel
Direct war with Iran means insecurity in sea routes because the Red Sea and the Mediterranean are no longer safe for ships bound for Israel.Economy
- Transportation costs: Insurance rates for ships bound for the ports of Eilat and Haifa have become staggering.
- Expensive goods: When the cost of imports rises, inflation spirals out of control. Independent studies show that, contrary to the claims of economic members of Benjamin Netanyahu’s cabinet who declare inflation at 3 percent, food prices in Tel Aviv supermarkets are experiencing double-digit growth.
Will Israel’s economy crumble under the blows of the war hammer?
The answer to this question can be summed up in one sentence: Israel usually has no middle ground with wars of attrition. The regime’s economic structure is like a delicate and luxurious watch, designed to work in an isolated and luxurious environment, but when it is subjected to the hammer blows of a long war, its gears are crushed.
In such circumstances, Netanyahu is looking to previous reserves and expects more help from the United States than ever. Statistics show that even assuming the war ends today, it would take Tel Aviv at least 10 years to return to the indicators of 2023.