Israeli press review: Expanding wars spark concerns over economy and air defence capacities
Years of wars affecting economy
On Monday, the governor of the Bank of Israel, Amir Yaron, filed the financial institution’s 2025 annual report to the government and the Knesset.
The report indicates that the Israeli economy has demonstrated resilience despite the ongoing conflicts, including Israel’s genocidal war on Gaza, while also highlighting some areas of concern.
In the past year, the report says, "growth accelerated, inflation moderated and returned to within the target range, unemployment remained very low, the risk premium declined to near prewar levels, and capital markets recorded particularly strong results".
However, since October 2023, Israel's economy recorded an 8.6 percent loss of GDP, which amounts to about 175 billion shekels ($55.95bn).
If security expenses and payments to manufacturers abroad are included, the loss of GDP is even greater and amounts to about 375 billion shekels, according to the report.
The deficit in 2025 was at 4.7 percent of GDP, an improvement from 2024, but the overall debt-to-GDP ratio has grown by more than 8 percent since October 2023, amounting to 68.5 percent debt-to-GDP ratio, more than the OECD median.
The report said that Israel's security expenses since October 2023, amounting to 350 billion shekels, led the growing deficit.
Meanwhile, arms industry sales amounted to 10 percent of goods and services exported by Israel between 2019 and 2024, standing at $14.8bn.
Israel's central bank also noted a decline in per capita income, with every citizen losing about 35,000 shekels ($11,220) of possible earnings since October 2023.
"Both the GDP level and the pace of growth remained below the long-term trend,” the report said, adding that the main factor constraining faster growth was the decrease in labour supply, mainly due to the mobilisation of reservists and the absence of Palestinian workers, as most have been banned from entering Israel since October 2023.
According to the report, in the years 2024-2025, there was a negative immigration trend in Israel, with the economy losing 9,000 workers on average per year.
While the report did not include the economic implications of the current Israeli-US war on Iran, Ynet reported on Tuesday that the Israeli finance ministry estimates the economy loses about 1.25 billion shekels for every week in which the education system is not operating normally.
As a state of emergency has practically closed schools across the country since the war began on 28 February, hundreds of thousands of parents struggle to get to work or maintain a normal professional activity while their children are at home.
Israel's Central Bureau of Statistics also reported on Monday that some 170,000 workers were put on unpaid leave since the war started. Local outlet TheMarker said the numbers could grow as the war drags on.
Doubts regarding Israel's air defence
On Saturday, two direct hits of Iranian ballistic missiles on the Israeli cities of Dimona, home to a nuclear facility in southern Israel, and the nearby town of Arad reignited accusations that the government fails to protect civilians.
On Tuesday, TheMarker asked whether Israel's peripheral areas such as Dimona and Arad are more likely to be hit by Iranian missiles than wealthier and more central ones.
"Israeli air defence systems divide the country into zones, each receiving varying levels and types of protection," the report said.
Israel's three-layered air defence system operates according to several algorithmic categories which dictate the type of interceptor that will be launched against a threat.
"The level of protection is determined by factors such as population density, the degree of available protective infrastructure, existing civilian infrastructure and the area’s strategic sensitivity," the report said.
For example, Tel Aviv, the heart of the Israeli economy, are better protected than less populated towns and areas in southern and eastern Israel.
Conversely, strategic locations, like Haifa in the north, where last week Iranian missiles struck Israel's refineries, receives greater protection.
Another determining factor in the Israeli air defence operation lies in how the military chooses to intercept missiles "with expensive American interceptors or cheaper Israeli ones", the report states.
Since Israel and the US attacked Iran on 28 February, the Islamic Republic launched some 450 retaliatory missiles towards Israel. According to TheMarker, more than 1,200 Iranian missiles have been fired at Israel since October 2023.
Although the number of interceptors still available to Israel is subject to censorship, the report indicates that the stock is limited and its renewal takes time.
"Even if the IDF [Israel’s army] can continue to defend the Israeli home front for many more weeks, the limitations of air defence will not allow the Israeli economy to reopen as long as the war continues," the report said.
"Ending the war with Iran ultimately lies in the hands of US President Donald Trump, but the Israeli economy will not be able to sustain it indefinitely."
New law expands powers of religious courts
The Knesset approved a controversial law that allows rabbinical and Islamic courts to arbitrate civil affairs, expanding their legal scope beyond marriages, divorces and other religious matters, Haaretz reported on Tuesday.
According to the government-backed legislation, if two sides in a civil legal case agree, they can turn to the religious courts for arbitration.
'What emerges here is legislation unlike anything found in any democratic country, and that tells us what this really means'
- Anat Thon Ashkenazy, Israel Democracy Institute
The law does not specify in which legal cases citizens can resort to them, but according to Haaretz, the parliament "determined that matters related to criminal law, administrative issues, or any proceedings in which the state or a local authority is a party will not be heard within this framework".
The new law "raises concerns about harm to the principles of equality, the judicial system and women’s rights", Haaretz reported.
The Israel Democracy Institute, an independent research centre, said in a legal opinion that "the proposal is not consistent with the right to equality, which is one of the fundamental principles of our legal system".
Anat Thon Ashkenazy, a legal adviser of the centre, told Haaretz that "ultimately, what emerges here is legislation unlike anything found in any democratic country, and that tells us what this really means".
On Monday, former prime minister Yair Lapid, leader of the centrist-secular opposition party Yash Atid, said that with the passing of the law, the “status quo” that had prevailed in Israel regarding relations between religion and the state effectively “died”.
"When rabbis are given the powers of a court of law, there is a name for that: it is called a halachic [Jewish religious law] state," Lapid said.
This article was sourced from Middle East Eye.
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