{"id":358333,"date":"2026-03-26T02:11:20","date_gmt":"2026-03-26T02:11:20","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/358333\/"},"modified":"2026-03-26T02:11:20","modified_gmt":"2026-03-26T02:11:20","slug":"is-israels-economy-collapsing","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/358333\/","title":{"rendered":"Is Israel\u2019s Economy Collapsing?"},"content":{"rendered":"

Over the last two years, a major debate has been playing out among observers of the Israeli economy. Some have argued that international pressure<\/a>, alongside the high cost of ongoing war<\/a>, has pushed the Israeli economy to the brink of collapse. According to these scholars, Israel is facing a crisis comparable to what the South African apartheid regime faced in its final years. The economist Shir Hever, for example, refers<\/a> to Israel as having a \u201czombie economy<\/a>\u201d that \u201cis not aware of .\u00a0.\u00a0. its impending demise.\u201d Hever argues<\/a> that \u201cthe level of crisis of the Israeli economy is severely underestimated because the Israeli government is working hard to try to hide the information,\u201d pointing to the emigration of educated Israelis<\/a> abroad, manpower<\/a> deficiencies<\/a> faced by the military, labor shortages<\/a>, business closures<\/a>, and Israel\u2019s significant debt<\/a>. These economic indicators are sometimes read as portents: According to Hever<\/a>, if economic recovery remains slow and emigration continues, \u201cIsrael\u2019s military will cease functioning as a modern army within 2-3 years.\u201d The historian Ilan Papp\u00e9 has even more boldly argued<\/a> that \u201cIsrael\u2019s economic crisis\u201d is one of the factors that makes \u201cthe collapse of Israel .\u00a0.\u00a0. foreseeable.\u201d <\/p>\n

On the ground, though, Israel\u2019s political and war machines grind on, seemingly undeterred by these developments\u2014and perhaps even buoyed by them. It is true that certain smaller sectors, such as tourism<\/a>, construction<\/a>, and agriculture<\/a>, are reeling from the war and international boycotts. However, sales of Israeli arms<\/a> and surveillance technology\u2014cynically marketed as \u201cbattled-tested\u201d\u2014are booming<\/a>, with even supposedly Palestine-supportive countries like Ireland<\/a> rushing to buy. Alongside other foreign investments<\/a>, this has contributed to the flourishing<\/a> of the Israeli<\/a> stock market<\/a>\u2014so much so that someone who had invested in the Tel Aviv Stock Exchange on October 6th, 2023 would, by 2026, have turned a significant <\/a>profit<\/a>. Wars generally devastate economies, the scholars Assaf Bondy and Adam Raz write<\/a>, but in Israel \u201csomething unexpected has happened. Rather than collapsing, Israel\u2019s economy proved remarkably resilient.\u201d They argue that this is also because the Israeli government paid military reservists very high wages, which served as an economic stimulus for \u201cbusinesses [to] continue operating, the Treasury [to maintain] fiscal credibility, and rating agencies [to] avoid complete downgrades.\u201d<\/p>\n

To understand these starkly divergent assessments, I spoke with historian and political economist Joel Beinin about the impact of war and global pressure on Israel\u2019s economy; the country\u2019s understudied economic vulnerabilities; and what this means for how the left should go about putting economic pressure on Israel. This interview has been edited for length and clarity. <\/p>\n

Maya Rosen: A major question on the left is whether the past years of intensive global protest, especially various boycott campaigns, have caused the Israeli economy to falter, in part by helping to make Israel an increasingly unattractive destination for global investments. To what extent is this the case? <\/p>\n

Joel Beinin: Any country that has just fought, and actually hasn\u2019t even concluded, the kind of genocidal campaign that Israel launched on Gaza in 2023 would have a faltering economy. The war, if we can call it that, cost a ton of money: between $80 and $112 billion by the end of 2025, as estimated by the Bank of Israel. The ultimate cost is likely to be much higher than that (especially if we add in the cost of the war with Iran, which is increasing Israel\u2019s spending by $3.4 to $4.2 billion a week). After October 7th, Israel\u2019s credit rating was also temporarily downgraded by both Standard & Poor\u2019s and Moody\u2019s, the international entities responsible for assessing the state of a country\u2019s capital investment. So yes, the Israeli economy took a very big hit as a result of the war. <\/p>\n

Only a small modicum of this has been due to boycott and divestment campaigns. For instance, the Danish Pension Fund withdrawing all investments from Israeli banks, and the Irish Strategic Investment Fund divesting about 3 million euros from five Israeli banks and the Rami Levy supermarket chain\u2014those have been the main divestment hits to the Israeli economy.<\/p>\n

Further, these losses have been offset by substantial capital inflows into the Israeli economy in 2024 and 2025. The Tel Aviv Stock Exchange hit a record high in 2025. United States-based firms also acquired Israeli startups at a record rate in 2025, mostly in the high tech sector, which comprises about 11% of Israel\u2019s workforce and pays 25% of all income taxes. Not only that, Israel just concluded a deal to supply Egypt with natural gas worth $35 billion, and half of that money will go directly into the coffers of the Israeli state. <\/p>\n

Overall, then, there\u2019s absolutely no question that there has been an economic problem for Israel in the past years, but it hasn\u2019t been substantial enough to send the entire economy into a tailspin, and certainly not to bring about the collapse of the country. This could change if the Iran war continues for many weeks, beyond the capacity of the Israeli economy to sustain it. But it isn\u2019t yet clear whether the Israeli political leadership is willing to commit that kind of economic suicide.<\/p>\n

MR: So we\u2019re not seeing countries or global companies saying, \u201cIt\u2019s just not worth it to be in Israel,\u201d either because of international protests or simply because of the instability of war. Is that correct?<\/p>\n

JB: Right. Take for example arms exports: 2024 was the fourth year in a row in which Israel had a record level of arms exports. Europe was the largest purchaser of military exports from Israel, 54% of the total in 2024. Meanwhile, the signatories of the Abraham Accords\u2014the United Arab Emirates, Bahrain, and Morocco\u2014counted for 12% of the total sales, up from 3% in 2023. The fact that Israel annihilated Palestinian society in the Gaza Strip mattered not one whit to any of these countries, with the exception of Spain and, to a limited extent, Slovenia.<\/p>\n

This trend also holds for companies. Intel has invested about $27 billion in Israel\u2014more than any foreign firm. And it employs 9,000 people. It is Israel\u2019s largest private employer. In 2024, Intel announced that it was going to invest an additional $25 billion to expand its chip manufacturing operations in Kiryat Gat, where it already has an enormous presence. It received $3.2 billion in subsidies from the Israeli government to do that. <\/p>\n

MR: There have been a few moments when it has seemed like Israel\u2019s key allies, like Germany, have moved to suspend ties with Israel over Gaza. How should we understand these moments within the broader trajectory you\u2019re laying out?<\/p>\n

JB: Germany, as we know, has a kind of a sickness about its relationship to Israel, but overall the German case is an example of the insubstantial nature of the European Union\u2019s dissent to Israel\u2019s annihilation of the Gaza Strip. <\/p>\n

Germany is Israel\u2019s second-largest arms supplier, after the US, and in August 2025, Germany announced that it was going to suspend the sale of some weapons that could be used in the Gaza Strip. Then, in October, the Trump \u201cceasefire\u201d began, and by November, Germany had announced it was resuming arms exports to Israel. So the initial German announcement amounted to absolutely nothing\u2014actually less than absolutely nothing. By December 2025, Germany was receiving the first shipment of the Arrow 3 air defense systems, which Israel created using about $1 billion in research and development funds from the US. Afterwards, Germany announced a new agreement for a more advanced Arrow system, which is the largest ever Israeli military export deal: this time for $6.5 billion.<\/p>\n

MR: Does that mean the Israeli economy has benefited specifically from the war itself?<\/p>\n

JB: The high tech and military production sectors absolutely benefited. In 2024, military production achieved the greatest annual growth, with a 143% increase. High tech startup firms in Israel raised $11 billion that year, and then $15.6 billion in 2025. The war was a bonanza for these sectors, as is often the case. <\/p>\n

Overall, American capital put $60 billion into Israel in 2025. That dwarfs the $20 billion that the American government gave Israel since October 7th, 2023 to pursue the war. <\/p>\n

MR: If Israel\u2019s economy is less vulnerable to international pressure than scholars and activists have often thought, are there other vulnerabilities that you think could have a bigger impact on Israel? <\/p>\n

JB: I\u2019m not arguing that international pressure is not a vulnerability. I\u2019m arguing that it isn\u2019t a catastrophic crisis. It\u2019s one thing to say, \u201cIsrael\u2019s global brand is in the trash can,\u201d but this doesn\u2019t necessarily amount to an economic disaster on its own. <\/p>\n

What I would identify as the single largest vulnerability to the Israeli economy is the emigration of educated\u2014in many cases tech-educated, upper-middle-class, and even ruling-class\u2014Israelis. From 2009 to 2021, about 36,000 Israelis left the country every year. Then, in 2021, there was an upsurge of violence connected to the 2021 Unity Intifada<\/a>. That year, about 43,400 people left the country. In 2022, the number rose to 59,000, and, although these numbers are offset by some people who return, the total number of those leaving has only grown since then. <\/p>\n

The business association of the high tech companies in Israel reported in December 2025 that 53% of its member firms experienced a rise in relocation requests to positions abroad. So Israelis who work in high tech are increasingly asking to be moved to Europe or the United States. This is a trend that may, over time, harm Israel\u2019s technological leadership. It may also create strain on the Israeli military, which requires hundreds of thousands of reservists to serve in the army. Some people say this is catastrophic already. My argument is that two or three years of this is bad, but not disastrous. Five or ten years of it would be disastrous. <\/p>\n

MR: Are there other vulnerabilities that you think are important to mention that are often overlooked? I\u2019m thinking about internal inequality\u2014Palestinian citizens, Haredim.<\/p>\n

JB: So first of all, the Israeli economy is a capitalist one, and it has all the normal contradictions of any such economy. When Netanyahu became finance minister of Israel in 2003, in a government led by Ariel Sharon, he lowered the highest marginal tax rate on both individuals and corporations, increasing the gap between the rich and the poor. This neoliberal program has continued once Netanyahu came back to power as prime minister in 2009, and it has exacerbated previously existing structural forms of inequality. <\/p>\n

Of course, the most important form of inequality inside Israel\u2014to put aside for now the West Bank and the Gaza Strip\u2014is between Palestinian and Jewish citizens. Palestinians make up about 20% of all Israeli citizens. On the whole, the community is poor. Over 50% of Palestinian citizens of Israel live at or below the poverty line. The other structurally unequal sector is the Haredim, because a large proportion of the men don\u2019t work, many receive government subsidies to keep them studying in yeshivot, and the birth rate is very high. <\/p>\n

You have this structural situation in which a very substantial proportion of the population\u2014Palestinian citizens and Haredi Jews\u2014are impoverished. No Israeli government has actually proposed policies to adequately address that situation. So there is this ongoing economic vulnerability resulting from the big gap between the rich and the poor, which is of course true of many other places as well.<\/p>\n

MR: Given everything that you\u2019ve outlined, how should the left think about putting economic pressure on Israel in a way that\u2019s strategic?<\/p>\n

JB: We need to distinguish targets more carefully. We had a boycott campaign in Portland some years ago to get local businesses not to carry SodaStream products because they were manufactured in a settlement. Those kinds of campaigns have had a very small impact on Israel, because the total amount of money involved is minute compared to the scale of the Israeli economy. <\/p>\n

On the other hand, large companies like Intel, Amazon, and Microsoft are deeply invested in Israel. The Palestine solidarity movement is not currently strong enough to take these companies down, but given their importance to Israel they are still worth targeting. We need big educational campaigns, campaigns to get universities to cut their ties with these companies, and so forth. As another local example, Portland State University has long had special ties with Boeing, which means that its students are given preferential interviews to be hired at the company. Student activists have targeted this relationship, which has made the university nervous. And that\u2019s good. That is the sort of thing that should happen more. <\/p>\n

Ultimately, though, the most important way to put economic pressure on Israel is to try to change internal US policy towards Israel. If the US had said, \u201cOkay, we have the Leahy Law, and that means that you can\u2019t gratuitously massacre civilians, and we see that you\u2019re doing it, so this is the list of weapons that we\u2019re not giving you\u201d (this would include F16 spare parts and a whole array of things that were absolutely critical for Israel\u2019s conduct of the war); if the US had said, \u201cWe are going to sanction the units that are doing this illegal activity,\u201d then Israel wouldn\u2019t have been able to commit the genocide, certainly not to the same degree. That\u2019s the critical factor. That\u2019s what we should focus on.<\/p>\n","protected":false},"excerpt":{"rendered":"Over the last two years, a major debate has been playing out among observers of the Israeli economy.…\n","protected":false},"author":2,"featured_media":358334,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46],"class_list":["post-358333","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-il","tag-israel"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/358333","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=358333"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/358333\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/358334"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=358333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=358333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=358333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}