Business leaders worry about government priorities to support war-battered economy
Prominent entrepreneurs see the continued prioritization of political budget allocations, over economic ones, delaying recovery at a cost to the public
Sharon Wrobel is a tech reporter for The Times of Israel.
Prominent leaders of the tech, finance and business sectors warned that without a budgetary recovery plan to rebuild war-torn communities and help jumpstart growth in the economy, the burden will fall on the Israeli public for years to come.
The warning comes ahead of a year in which Israeli households and businesses will be faced with paying more taxes and receiving fewer services to help finance the ballooning costs of the ongoing war with the Hamas terror group, while other costs are also set to increase.
Institutional investors, serial entrepreneurs and bankers gathered on Tuesday at the annual Globes business conference in Tel Aviv pondering and chatting about the prospects for the country’s economy post-war.
Visitors poured into the halls of the conference listening to leaders of Israel’s major companies representing most sectors of the economy — from banking, insurance and aviation to energy and tech — who voiced their frustration with the government continuing to place sectoral interests and self-preservation at the top of its national priorities in the 2025 budget.
“As long as the gap between politically motivated priorities in the budget and those that are needed from purely economic considerations is widening, the recovery of the economy will be delayed and with it its growth potential,” said Bank Hapoalim chairman Reuven Krupik.
The comments come as Israel’s parliament is expected to hold its initial vote on the 2025 budget next week, which must be passed by the end of March or the government will automatically fall, triggering early elections.
At the beginning of November, the cabinet passed the first hurdle for the passage of the 2025 budget, which includes an austerity package of about NIS 40 billion ($11 billion) in the form of tax hikes and steep spending cuts to fill a fiscal gap between expected revenue and high defense expenses to finance the ongoing war.
As part of the austerity measures, National Insurance contributions, which include health tax payments, will be increased; income tax brackets and tax credit points will be frozen; and value-added tax, which is an indirect tax that is collected through the purchase of goods and services, will rise from the current 17% to 18% in 2025. In addition, wages and pensions will also take a hit.
Speaking at the conference, Phoenix Holdings CEO Eyal Ben Simon welcomed that the government is advancing the passage of the budget approval but raised concerns about its composition.
“There are political constraints when formulating the budget that are not easy to overcome and I don’t envy anyone in the government, but we need hope in the state budget and I didn’t see hope in the budget,” said Ben Simon.“I would build it differently, with a much longer horizon that encourages growth engines for the economy for the coming at least 10 years.”
The ballooning costs of the 14-month war along with the absence of many employees being called up for reserve duty, as well as thousands of Palestinian workers, have damaged many sectors of the economy, including tech, construction, energy and agriculture.
“We will need a lot of money to restore the army, the economy and businesses that were hit during the war,” said Moshe Kaplinsky, chairman of Bazan, Israel’s largest refinery and petrochemicals group. “What worries me is that the government does not have a coherent plan that defines and manages needed priorities to maintain a balanced deficit in a time of crisis.”
Kaplinsky lamented that despite the ceasefire with the Hezbollah terror group there is still no budget to return residents of northern Israel back home and help them rebuild their lives. Some 60,000 northerners remain displaced following months of Hezbollah’s rocket fire. They were evacuated shortly after Hamas invaded the south on October 7, 2023 — killing some 1,200 people, mostly civilians, and taking 251 hostages — amid persistent rocket and missile fire from Lebanon that began, unprovoked, a day after the Hamas massacre.
“I am very concerned that we may return to a lost decade similar to what happened after the Yom Kippur War,” Kaplinsky cautioned.
Business leaders called for a change in priorities that would encourage the ultra-Orthodox population to go out to work and serve in the army to share the burden of Israel’s working force fighting the war, doing reserve duty and driving the economy by paying taxes. As the country’s security needs are continuing to grow, it is creating an economically unviable situation.
“The discrimination in the distribution of the burden between populations needs to be fixed, including the failure to draft whole sections of the population into the army,” said Krupik. “As long as these issues are not dealt with, chances for economic recovery are lower and the burden on families and households will be greater.”
