Here are some of the main factors in the report:

• War spending has raised government debt and deficits.
• The economy is growing again, but growth per capita remains slow.
• Israel’s high cost of living is only getting worse.
• High-tech has been driving growth but it can’t sustain the whole economy.

Let’s dive in.

Israel entered the war with a remarkably strong fiscal structure, which allowed it to absorb a surge in defense spending without an immediate crisis. But that cushion is shrinking. In just two years, the debt-to-GDP ratio has jumped by 10 percent, and the defense budget has doubled. That’s not just expensive for the state—it’s costly for everyone. Higher borrowing needs mean higher interest rates, and the government ends up competing with the private sector for capital.