Israel's war economy faces reckoning amid debt, brain drain and costs Israel's next government will inherit an ever-increasing economic burden, even as the election campaign revolves around Iran and military security, Bloomberg reports. Beneath the country's headline-grabbing growth fueled by the tech industry — foreign direct investment hit a record $26 billion last year — lurk mounting debt, job shortages, immigration and deepening social inequality. Defense spending has soared to nearly 8% of GDP, the highest among Western peers, with Prime Minister Benjamin Netanyahu proposing an additional build-up of ≈ $145 billion over 12 years that could push debt to 85% of output GDP per capita has barely moved since October 2023 The central bank expects growth of 5.6% this year, but without the outsized contribution from U.S. chipmaker Nvidias arm In Israel, the expansion will be only 3.4%. About 100,000 Israelis, many of them highly skilled professionals, left in 2023–24, and the flow continues. Haredi military exemptions leave reservists, including skilled workers, carrying a heavier burden; Limited core education in many ultra-Orthodox schools also threatens future productivity. Half the cost of living, especially housing, remains among the highest in the OECD. Public services lag behind the OECD averages, which creates a long medical wait. Whoever wins the Knesset elections will inherit the same central dilemma: to what extent Israel is willing to stretch its finances and social cohesion to maintain the relentless focus on military threats. substack | talk.

Israel's war economy faces reckoning amid debt, brain drain and costs Israel's next government will inherit an ever-increasing economic burden, even as the election campaign revolves around Iran and military security, Bloomberg reports. Beneath the country's headline-grabbing growth fueled by the tech industry — foreign direct investment hit a record $26 billion last year — lurk mounting debt, job shortages, immigration and deepening social inequality. Defense spending has soared to nearly 8% of GDP, the highest among Western peers, with Prime Minister Benjamin Netanyahu proposing an additional build-up of ≈ $145 billion over 12 years that could push debt to 85% of output GDP per capita has barely moved since October 2023 The central bank expects growth of 5.6% this year, but without the outsized contribution from U.S. chipmaker Nvidias arm In Israel, the expansion will be only 3.4%. About 100,000 Israelis, many of them highly skilled professionals, left in 2023–24, and the flow continues. Haredi military exemptions leave reservists, including skilled workers, carrying a heavier burden; Limited core education in many ultra-Orthodox schools also threatens future productivity. Half the cost of living, especially housing, remains among the highest in the OECD. Public services lag behind the OECD averages, which creates a long medical wait. Whoever wins the Knesset elections will inherit the same central dilemma: to what extent Israel is willing to stretch its finances and social cohesion to maintain the relentless focus on military threats. substack | talk.