Israeli economy shows resilience amid continuing threats to security

Tel Aviv – US Treasury Secretary Scott Beesen and Israeli Finance Minister Bizalil Sottic met last week because of a “very influential meeting” aimed at strengthening economic relations between Washington and Jerusalem.

The two men “emphasized a strong and permanent commitment to both countries to a strategic economic partnership”, with discussions focusing on “the importance of deepening economic cooperation, promoting innovation, and promoting financial and commercial relations,” according to the Ministry of Treasury statement.

“It was a great journey,” said Eitan Fold, spokesman with Smotrich.

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Treasury Secretary Scott Besense, Israel Finance Minister Bizal Soutrich, will meet in Washington, DC (The US Treasury)

“It was extremely important for the minister to meet in Smotrich early in his role, just as President Trump met with the Prime Minister [Benjamin Netanyahu] Immediately to show the relationship between Israel and America. It also shows that all doors are open to work together for the next few months and years on all economic issues.

The economy of the Jewish state was beaten and bruised in the aftermath of Hamas on October 7, 2023, and the massacre and wars that followed against Palestinian terrorists in the Gaza Strip and Hezbollah in Lebanon, yet it showed great flexibility.

Israeli -Israeli GDP grew at an annual rate of 2.5 % in the fourth quarter of 2024, according to the Central Statistics Office, after expanding 5.3 % from July to September and after 0.3 % shrunk in the second quarter.

In general, the economy grew by 1 % in 2024 – exceeding the expectations of the Bank of Israel (BOI) by 0.6 % – but decreased from 1.8 % in 2023 and 6.3 % in 2022, which is the previous year for the invasion of Hamas terrorism.

The Bank of Israel expects GDP growth 4 % in 2025.

The expert says that the American Iron Dome needs to be “more complicated” to deal with “clean threats”.

The Israeli national flag flies in half of the staff outside the Tel Aviv Stock Exchange in Israel on November 7, 2023. (Kobi Wolf / Bloomberg via / Getty Images)

Other main indicators remain on solid ground, as Israel recorded the unemployment rate by 2.6 % in January 2025, and annual inflation over the previous 12 months of 3.8 %.

“It is surprising that the war has not ended yet, but Israel has come out well,” Dr. Alex Koman, an expert in the creation of value at the Holon Institute of Technology in Israel.

However, he pointed out that the economy has achieved great success as hundreds of thousands of reserve soldiers in the Israeli Defense Army were removed from their jobs to fight. The tourism industry stops effectively with the abolition of most international airlines, flights inside and outside the country, and the agricultural industry has been paralyzed mainly because foreign workers have returned to their countries of origin, and the major industrial companies in the south and north forced to stop operations because of their presence in the fire line.

“The inputs in the country’s treasures decreased because many companies closed and the government spent more for the war effort while collecting them,” Koman said, noting that the government also spent huge sums on housing for tens of thousands of displaced people.

“The situation seemed very comfortable, but Israel had very large exits on the Internet, in particular, and it did very well with the military industries because these companies are among the only companies in the world that have proven themselves under intense fire, which led to sales of countries concerned with cover from Russia or China.”

The traveler is checking the departure schedule at Ben Gurion Airport in Tel Aviv on September 29, 2024. (Gil Cohen-Magen / AFP via Getty Images)

However, there are challenges in the future, perhaps, above all, pushing for the reconstruction of southern and northern Israel, which were destroyed during wars against Hamas and Hezbollah, respectively. Jerusalem allocated $ 9.35 billion in construction, and the funds that were included in the state budget that Parliament must pass by the end of March or the government to resolve the law.

The authorities also raised the value-added tax on goods and services by 1 % on January 1 to help pay the price of wars, while prices increased by 4-6 % on average since October 7, 2023.

As a result, Koman warned of the potential “depletion of brains”. “Since the salaries in Israel are low and high expenses, Bedouin technology finds it easy to work in the United States, Europe or even Thailand, where they are very welcome because they are very qualified,” he said.

Esteban Chloor, a professor of economics at the Hebrew University of Jerusalem and a chief researcher at the Institute of National Security Studies in Tel Aviv, said that the financial recovery is largely dependent on developments in the war against Hamas.

Israel’s economy is fighting to recover with the preparation of the Israeli war Hamas

A El Al Israel Airlines Boeing 737-800 Lands at Frankfurt Rain Man International Airport in Germany, June 2, 2023. (Fabrizio Gandolfo/SOPA Images/Lightroctoc via/Getty Images)

“We will start seeing healing if the intensity of the fighting decreases and it will be more essential as soon as there is a solution to Gaza’s tape and the stability of the region,” he said.

“The picture is somewhat dark, but good news is that the economy has not collapsed, as we saw with Russia or Ukraine. But it does not grow and this is a sign that we need to think about this more than that.”

The prominent Israeli analysts emphasized that the meeting between Bessent and Smotrich had traces that exceed the economy, which represents a major shift in politics from the Biden administration.

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The Israeli army tanks were deployed in an area near the southern border with the Gaza Strip on July 9, 2024. (Jack Guez / AFP via Getty Images)

The previous US government unofficially boycotted the Israeli minister, and even considered sanctions against him because of his belief in the historical rights of the Jewish people in Judea and Samaria-usually known as the West Bank-and his support for the hard-line policies that are directed to the similar Nazis per day.

It is worth noting that Smotrich is the Minister of the Israeli Ministry of Defense, which Netanyahu was assigned to supervise the civil administration, and the body responsible for approval of construction and dealing with other bureaucratic issues in the region C of Judea and Samaria, or the West Bank.