With the world watching in horror as the raging Palestinian-Israeli conflict approaches its eight month anniversary, arms makers continue to quietly make a tidy profit from the war. Israel’s domestic defense sector is no exception.
Israel’s Central Bank expects the war in Gaza to cost a whopping 250 billion shekels ($67.4 billion US) through 2025, as defense spending as a share of GDP jumps from 5.3% to 9%. That’s amid increasingly dour circumstances in the civilian economy, with Q4 of 2023 seeing Israel’s GDP drop by over 20%, while consumption dropped 27% and investment by 70%.
Most worrying of all for Tel Aviv is the potential loss of investment flows – particularly in the tech sector. “We can’t even begin to measure how many people have decided not to invest in Israel in the short term, let alone on a permanent basis,” Shoresh Institute economist Dan Ben-David told Bloomberg in a report published Thursday.
But as the civilian economy suffers, Israel’s arms makers have no complaints, boasting record profits, buoyed by Washington’s nod to an unprecedented $17 billion in new military aid (more than five times the $3 billion+ Tel Aviv has been getting from the US annually since the early 1980s). A portion of the funds can be spent on Israeli-made weapons – a privilege not granted to other US allies, with roughly half a billion dollars also typically slated for Israeli-US joint research in missile defense.
Israel’s top three defense giants – Israel Aerospace Industries (IAI), Rafael Advanced Defense Systems and Elbit Systems have enjoyed surging stock prices and orders growing at a pace beyond their ability to keep up.
