It is an unfortunate fact that even after 100 days of hard war, the government still makes economic decisions according to the pre-war concept.
Under this concept, the main preoccupation of decision makers is dividing the "national pie" in order to ensure the political survival of the bodies in power, rather than increasing the "national pie" while encouraging investment, innovation and growth.
Like the security concept, the economic concept must change in light of the new reality.
A prominent component of the new reality is the significant multi-year increase that will be required in defense expenditures and in the rehabilitation expenses of the communities and infrastructure that were damaged. In terms of economic policy, the main economic challenge is how to support the new security needs while conducting responsible budgetary policy that supports the recovery of economic activity and the return to growth, without undermining economic and financial stability.
IDF forces in ground operations in the Gaza StripIron Swords 2023, photo: IDF Spokesperson
Meeting this challenge requires a change in the economic concept, the essence of which is a fundamental change in national priorities. In the context of the state budget for 2024 and the coming years, in order to meet the increase in defense spending, adjustments in other items are required. This is so that the budget deficit will remain a reasonable size, and one that will not weigh on Israel's stability and economic resilience.
These adjustments, both on the expenditure side and in government revenues, are liable to be painful and even harm the public's standard of living. Therefore, it is especially important that the steps taken include the need to support the recovery and recovery of the economy, while preferring budget items that support growth.
On the day after the war, new economic opportunities will be created, and already today many elements in the business sector are engaged in the issue. Among other things, this includes an increase in demand for construction and rehabilitation, infrastructure, high-tech, defense industries and financial sources of financing. I believe that the day after the war, with the return of citizens' confidence in Israel's security strengths, the business sector will be there to seize these opportunities and support a return to economic growth and prosperity.
The writer is the chief economic advisor of Bank Hapoalim
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