Israelis Face Cost-of-Living Crisis as War Costs Soar in 2025
As 2025 begins, Israelis are grappling with the financial fallout of prolonged conflict, marked by rising taxes and household expenses. A 40-billion-shekel ($11 billion) war bill has led to widespread cost-of-living concerns, exacerbating existing social and political tensions.
The Israeli government recently implemented austerity measures, including a 1% increase in value-added tax (VAT), alongside cuts to public spending. These changes are already impacting households nationwide. Business newspaper The Marker has gained attention with an online calculator that estimates the additional financial burden for families.
Adi Einbinder, a working mother of three, voiced her concerns on a radio show, sharing how her family must now rely on support from her parents. “We’re supposed to be helping them right now. We feel trampled,” said Einbinder, highlighting the economic strain felt by middle-class families.
War Costs Push Defense Spending Higher
Since the October 2023 Hamas-led attack and subsequent multi-front conflicts involving Iran-backed militias, Israel’s government has prioritized national security under the motto “Never Again.” While a ceasefire in Lebanon and a reduction in Gaza fighting have eased some tensions, defense spending remains a top priority.
In 2025, Israel’s defense budget is set to reach 107 billion shekels — a 65% increase compared to pre-war allocations. Over the next decade, military spending is expected to grow by at least 20 billion shekels annually, equivalent to 1% of the country’s GDP.
Economics professor Momi Dahan from Hebrew University noted that war-related expenses, previously covered through government loans, are now being directly passed on to the public through taxation.
Economic Slowdown Impacts Growth
Israel’s economy, valued at $525 billion, has felt the repercussions of the conflict. Key sectors like construction and tourism have declined, and labor shortages persist due to widespread reserve duty call-ups. In 2024, GDP growth was just 0.4%, placing Israel among the slowest-growing developed economies. While a modest rebound is projected for 2025, austerity measures are expected to limit economic recovery.
The rising financial burden on Israeli households underscores the far-reaching consequences of prolonged conflict, as both citizens and the economy struggle to adapt to the increasing costs of war and its aftermath.
Source : Swifteradio.com
