Washington - Saba: The American agency "Bloomberg" confirmed that the Israeli government, amid its ongoing war on Gaza and Lebanon, has approved the 2025 budget, paving the way for increased military spending and higher taxes.
The agency noted that the 2025 budget, which focuses on more military spending, reflects a deep shift in priorities since the war began over a year ago. It added that "military spending, which accounts for about six percent of GDP, will reflect Israel's new priorities in wars."
It pointed out that this level of spending, reaching "six percent of GDP," is significantly higher than the 4.2 percent in 2022 and the OECD average of 1.7 percent.
The agency explained that "the war in Gaza and Lebanon, along with rising tensions with Iran, has weakened Israel's economy and finances, forcing Benjamin Netanyahu's government to focus on curbing the budget deficit."
It added that the deficit target for next year has been set at 4.3 percent of GDP, with military spending being the largest among all ministries, totaling 117 billion shekels. This is similar to the 2023 level but is 80 percent higher than the pre-war plan for 2024.
The agency recalled a statement from Israeli Prime Minister Benjamin Netanyahu, who said before the budget discussions, "There is no economy without limits; if you give somewhere, you need to take from somewhere else," using this to justify continued war funding while neglecting other areas.
While many Israeli analysts expected the government to focus on medium- and long-term growth drivers to support economic recovery from a prolonged war, according to "Bloomberg," Israeli Finance Minister Bezalel Smotrich stated that the budget "lacks reforms" and "focuses on a set of measures aimed at reducing the targeted deficit and long-term debt-to-GDP ratio."
The Israeli site "Globes" confirmed the "high costs of war and supply issues caused by expected tax increases in 2025 and wage hikes, all of which are driving prices up in Israel."
According to the site, "Bank of Israel" had to acknowledge this, and in its latest announcement on interest rates, it predicted that the annual inflation rate would reach 3.8 percent by the end of this year, and that interest rates would not decrease in the near future.
It added: "While financial markets around the world are working to exit a period of high inflation, Israel is moving in the opposite direction."