Director of Israel Studies at Mada al-Carmel warns of long-term structural damage to Israel’s economy despite massive U.S. and European support
Raqeeb – Dr. Imtanes Shahada, Director of the Israel Studies Program at the Mada al-Carmel Center, affirmed that the Israeli economy is experiencing real bleeding two years after the genocidal war in Gaza, noting that deep structural fractures will continue for many years despite massive U.S. and European support. He explained that key sectors—such as agriculture, tourism, housing, and advanced technologies—are struggling to recover, and that the image of a “stable economy” promoted by the Israeli government has completely collapsed.
Shahada’s remarks came during his appearance on the program Hadith al-Raqeeb, where he discussed the severe damage inflicted on the Israeli economy since the outbreak of the war on October 7, and the subsequent expansion of military fronts in Lebanon, Syria, Yemen, and Iran.
Shahada said the direct cost of the war to Israel has so far reached around 350 billion shekels (100 billion dollars), including military and civilian expenditures, the evacuation of northern and southern towns, and the reconstruction of affected areas. He added that 50–60% of this spending is covered by the U.S. administration through direct support to Israel’s budget.
He noted that Israel entered the war with relative economic strength, but its aftermath delivered long-term structural blows, most notably: a rise in external debt to around 7% of GDP, an expanding fiscal deficit, and a decline in Israel’s economic standing internationally—especially with European partners who constitute nearly 35% of its foreign trade.
Global Decline and Growing Boycott
Shahada pointed out that Israel is now facing an unofficial boycott in several fields, including academic, cultural, and artistic products, in addition to reluctance by many international companies to invest or engage in trade with it. He added that “the Israeli product has become unwelcome in many European countries.”
He stressed that this decline in global economic relations makes it difficult for Israel to restore its image as a safe and attractive investment destination, saying it has become “a repelling economy, not an appealing one.”
Most Affected Sectors
Shahada explained that tourism, agriculture, and housing were the sectors most severely hit. Tourism accounts for only about 4% of GDP, yet it is unlikely to recover soon amid increasing international rejection of Israel.
In agriculture, the government attempted to compensate for the absence of Palestinian labor by importing workers from East Asia, while the construction sector witnessed a slowdown of up to 50%.
He also noted the decline of the high-tech sector—Israel’s key engine of growth—which has experienced stagnation in employment and investment over the past two years, threatening long-term negative repercussions.
Debt Expansion and Ongoing Burdens
Shahada said rising interest rates on foreign loans have worsened the crisis, adding billions of shekels in monthly government interest payments. He added that the continued pressure from religious parties on the government to allocate massive budgets further increases financial burdens and blocks any real economic reform.
The Shekel and Stock Market: “Superficial Strength Masking Deep Fragility”
Despite the general deterioration, Shahada noted that the apparent strength of the shekel and rising stock indices on the Tel Aviv Exchange do not reflect economic reality, calling it “temporary beautification driven by political and psychological factors.”
He explained that the rise in defense and military-industry stocks is due to increased arms exports and politically driven investments from Jewish communities abroad aimed at supporting Israel’s economy.
Expectations for the Coming Phase
Shahada expects Israel to enter a phase of deep economic and political exposure in the near future, particularly with the likelihood of early elections and the reopening of internal accountability files.
He stressed that “the Israeli economy will not return to what it was before October 7,” and that recovery will not be soon even if the war stops, because the damage is “structural, not temporary.”
He concluded by saying: “The Israeli economy will not recover in the coming months or even the coming years. The decline, gaps, and boycott pressures will persist even after the war ends—and they may not subside without fundamental political changes in the region.”