Photo by Mostafa Alkharouf/Anadolu via Getty Images
- Israel's war with Hamas is costing the country the equivalent of 10% of GDP, the central bank's governor said.
- The Bank of Israel has estimated that it will cost about $58 billion between 2023 and 2025.
- That doesn't include lost revenue or more permanent spending needs.
The Hamas war will cost Israel the equivalent of a 10th of the country's GDP, the central bank's chief said on Wednesday.
Meanwhile, the economy will expand about 2% this year, similar to last year's pace, then accelerate closer to its growth potential of about 4%-5% in 2025, Bank of Israel Governor Amir Yaron told Bloomberg TV.
But the big challenge is on the fiscal side, he added.
"The war is costing us directly, and this is give or take, about 10% of GDP, and another 2% in lost revenue," Yaron said. "I call that the temporary hump of the war."
That echoed remarks he made Sunday at a cabinet meeting to discuss Israel's 2024 budget, when he said revised estimates prepared by the Bank of Israel put the war's expenses from 2023 through 2025 at about NIS 220 billion ($58 billion).
Yaron also told Bloomberg TV that in addition to the short-term spending spike, there is about 1% of GDP's worth of money that will go to long-term needs.
"The permanent component increase in spending on military, in the more expensive debt, and the revitalization of the south," he said.
On Monday, the country approved its 2024 national budget, adding $15 billion to fund the war. The plan has "significant steps" to offset the 1% increase, Yaron said.
The central bank has also stepped in to stop the shekel from sliding last year, providing $15 billion through swap lines, and pushing the currency up 8.8% against the dollar in November.