Israel's Wartime Budget: A Tough Road Ahead

The Israeli cabinet has approved a controversial wartime budget, which includes tax hikes and spending cuts, to fund ongoing military operations. The economy has slowed, and growth forecasts have been cut. The budget aims to maintain security and economic resilience amid financial challenges and political consequences.

The Israeli cabinet has given the green light to a long-awaited wartime budget, marking a turning point in the country's financial strategy amid ongoing military engagements. Key components include significant tax increases and spending cuts, aimed at covering the mounting costs of a war extending into its second year.

Amidst a slowed economy, exacerbated by workforce shortages, the finance ministry has revised its growth forecast for 2024 to a mere 0.4%, down from an earlier 1.1%. The absence of thousands of reservists and security-related employment exclusions are impacting vital sectors such as tech, construction, and agriculture.

Prime Minister Benjamin Netanyahu hinted at further boosting defense allocations, pending parliamentary approval and recommendations from a specialized panel. As Israel's economic landscape reorients to handle an 8.5% GDP deficit, the impending changes, including a VAT hike, could heavily impact Israeli households and trigger potential political upheaval if not passed.

(With inputs from agencies.)