Israel says economy lost over $73 billion during two years of war in Gaza

JERUSALEM - Israel lost 8.6 per cent of annual gross domestic product, or 177 billion shekels (S$73 billion), during the two years through 2025, figures that demonstrate the economic toll of the country’s state of near constant conflict.  

The findings – published by the Bank of Israel in its 2025 annual report on March 23 – pertain particularly to the war with Hamas in Gaza, which ran from the group’s 2023 attack on Israel until a ceasefire in October 2025. They also encompass operations in Lebanon.    

They don’t include the costs of the ongoing US-Israeli war with Iran, now into its fourth week. That campaign has seen Israel bombard the Islamic Republic with daily airstrikes, while defending against retaliatory attacks. The Cabinet in March approved a revised state budget for 2026, adding US$13 billion (S$16 billion) to cover the war.

“Prior to the current conflict we assumed a 5.2 per cent growth rate and a 3.9 per cent deficit target this year, which were supposed to stabilise our debt-to-GDP ratio,” Central Bank Governor Amir Yaron told reporters on March 23. “With a higher target deficit and a likely downward revision to the growth forecast, debt-to-GDP ratio will rise.”

The economic output loss from Israel’s 12-day war with Iran in June was 0.3 per cent of GDP, according to the report.  

Israel fought Hamas in Gaza for about two years, during which the military devastated the coastal strip and now occupies about half the territory.  

The war triggered a humanitarian crisis, alongside thousands of Palestinian deaths, worsening relations between Israel and many other countries. 

Bank of Israel researchers estimated that exports to eight European Union members categorised as more critical toward Israel dropped during the war – by US$1 billion in 2024 and US$1.5 billion in 2025 – while trade with others increased.

“This pattern may indicate that political positions are influencing export volumes to these countries,” the Bank of Israel reported. BLOOMBERG