'Picture of the nation'

Think tank finds Israeli economy resilient, but likely to face challenges as war drives up debt

Annual survey of the Israeli economy, population finds country recovering somewhat after initial shocks of Oct. 7

The Israeli social policy think tank Taub Center released its annual “Picture of the Nation” analysis of the State of Israel yesterday, breaking down its economy, demography, education and health-care system. This year’s review focuses on the effects of the Oct. 7 attacks and the ensuing war, as well as the domestic turmoil that preceded it, finding that some of them will likely be long-lasting while others were short-term issues that have since resolved themselves.

“For the past nine years I have dedicated countless hours preparing our annual publication, A Picture of the Nation, to make it encompassing and revealing, lucid and enlightening, and geared towards disseminating information while raising interest in the wide variety of topics the Taub Center studies throughout the year,” Avi Weiss, the think tank’s president, wrote in the opening. “This year was harder. Israel is at war, a war forced upon it by an evil terror group, Hamas, which attacked Israel on October 7, 2023 (on the holiday of Simchat Torah), brutally killed, raped, and tortured 1,266 Israelis in their homes, including 364 victims at the Nova dance festival and 352 soldiers, and kidnapped 256 Israelis… We pray that this war will soon end with all the hostages returned to their homes and able to begin healing.”

Weiss said he hoped that the report will “help inform decision-makers and the general public” about the state of the State of Israel.

In the report, the Taub Center generally describes the Israeli economy as resilient, bouncing back after a major blow in the final quarter of 2023 because of the war, which shut down businesses and schools, forced entire swaths of the country to evacuate and saw hundreds of thousands of people called up to the reserves. “With that, the Israeli economy continues to demonstrate resilience, as it has in previous wars and military operations,” the authors wrote.

One area of lingering concern on a macroeconomic level, however, is the country’s debt-to-GDP ratio in light of the government’s need to borrow more money in order to fund the current war and prepare the military for future conflicts. This comes as the country had its credit rating reduced, with rating agencies warning that it could be lowered further.

“The rise in the debt-to-GDP ratio may further endanger Israel’s credit rating and lead to an additional rise in interest payments,” according to the center.

Looking at data from the Central Bureau of Statistics, the researchers found a consistent rise in employment among Arab and Haredi men over the past two years, though they caution that the gains among Haredi men — which are not seen to the same extent in data from the National Economic Council — may be due to differences in how “Haredi” is defined. They add that much of the increase is among Haredi men in the 55-64 age group, meaning they will not be employed for very long before retiring.

The researchers found that while unemployment rose dramatically at the end of 2023, it has since nearly returned to pre-Oct. 7 levels.

Food insecurity remains a significant issue for many Israelis, with 16.2% of Israeli families living in food insecurity, roughly half of them in “serious food insecurity.”

An existing problem that has become more acute in the aftermath of Oct. 7 is local governments’ inability to hire social workers, at a time when their services are often desperately needed. As of last month, there are 895 unfilled positions across the country, according to figures from the Ministry of Welfare and Social Affairs. “The difficulty in filling positions is typical of the past decade, and, in particular, the past few years. It is linked to employment conditions, heavy caseloads, pay and the low status of social workers,” the authors wrote.

The homicide rate among Israel’s Arab population has tripled in the past four years, according to Israel Police data. There is also a growing disparity between the homicide rate among Arab and Jewish Israelis; until 2015, there were four murders in the Arab community for every one in the Jewish community, while last year there were 13. “The ratio of Arab to Jewish homicide rates is about 60% greater than the ratio of Black to White homicide rates in the U.S., which is around 8:1,” the researchers noted.

Environmentally, the authors found that Israel relies on landfills to dispose of garbage more than any other “high-income” country, which contributes to greenhouse gas production and may cause “dire sanitation crisis” as the country struggles to find alternative solutions for waste disposal.

The researchers also found that Israeli cities are sorely lacking trees, which they said “have an important influence on health and feelings of thermal comfort and quality of urban life.” This arboreal shortage is not universal, however, with wealthier inhabitants of Jerusalem, Tel Aviv and Haifa enjoying more shade than their lower socioeconomic neighbors. “The World Health Organization has determined that the most vulnerable populations to climate change, and, in particular, to increased heat burden, are those of low socioeconomic status. It is particularly important to enhance the areas where these populations are concentrated,” they said.

Israel is in serious need of more locally trained doctors, sporting both the lowest number of medical school graduates relative to the population in the Organization for Economic Cooperation and Development (OECD) and the highest percentage of physicians trained outside of the country in the OECD.

On a potentially positive note, the researchers found that the number of prescriptions for opioids has fallen “drastically” in recent years, particularly for fentanyl. (Read eJP’s report about this issue here.) Though the study’s authors warned against early celebrations: “More research is required to uncover whether patients switched to an alternative pain medication or bought drugs illegally, particularly given reports of widespread forgeries of prescriptions and smuggled medicines,” they said.