- November 6, 2024
- 4:42 pm
- Israel
While Ukraine spends more than a quarter of its GDP on defense, Israel follows closely behind, devoting 6.5% to security.
Defense Budgets: Israel and Ukraine
Amid escalating tensions and military conflicts, both countries—Israel and Ukraine—are allocating significant funds to defense needs. According to Jerusalem PostIsrael's defense budget for 2025 will be 117 billion shekels (6.5% of GDP), which is significantly higher than normal peacetime levels.
This amount is NIS 15 billion higher than the Finance Ministry's initial proposal and almost NIS 60 billion more than in a normal year. Ukraine's defense spending is four times higher as a proportion of GDP, but in this respect Israel's defense budget is larger than that of military powers such as Russia and the United States, as well as all NATO countries.
By comparison, Ukraine's defense spending is a record 22.1% of GDP this year and is expected to rise to 26.3% by 2025. These figures make Ukraine the leader in this indicator among all countries in the world, leaving Israel in second place.
“Ukraine and Israel face unique challenges, and their defense budgets reflect the extent of this threat,” reports Jerusalem Post.
Impact on the economy
For both countries, such high levels of defense spending have serious economic consequences. The Israeli government is seeking to prevent a “lost decade” when high defense budgets in the 1970s led to a prolonged economic crisis. The current budget is far from unprecedented. After the Six-Day War of 1967, defense spending as a percentage of GDP jumped to 19.7%, and in the two years after the Yom Kippur War of 1973 it reached 28.7%, after which it began to decline consistently.
As Professor Esteban Clore of the University of Jerusalem points out, continuing to increase defense spending without generating economic growth could have serious consequences for the civilian economy.
“If we continue to increase the defense budget without investing in growth, we will face unstable economic conditions,” – Professor Clore notes (Jerusalem Post).
Comparatively, Ukraine's economy is also experiencing significant difficulties due to military spending. Western partners, including the United States and NATO countries, provide support to Ukraine, allowing it to maintain ongoing defense spending. According to the Costs of War research project, Western aid accounts for 10-12% of Ukraine's GDP, compensating for economic damage that would otherwise be unsustainable for the country.
Defense and GDP: global scale
Israel and Ukraine occupy a special position in the world. Although many NATO countries are increasing their defense budgets, their share of GDP remains much lower. Even Poland, which has sharply increased spending to 4.12% of GDP, is far from the level of Ukraine and Israel. This highlights the unique financial burdens these two countries face.
| Country | Defense budget (% of GDP) |
|---|---|
| Ukraine | 26.3% |
| Israel | 6.5% |
| USA | 3.38% |
| Poland | 4.12% |
Impact on the labor market
High defense spending puts pressure not only on the budget, but also on the labor market of both countries. In Israel, longer periods of compulsory service and regular conscription reduce young people's access to education and slow their career advancement. Ukraine also faces difficulties: young people employed at the front are forced to delay their entry into work, which has a long-term impact on the country's economy.
“High defense spending is becoming a barrier to career advancement and education in both countries,” – says economic expert Jerusalem Post.
US and NATO support
The US and NATO are actively supporting Ukraine, sending significant funds and resources to help it confront Russia. According to the Costs of War Project at Brown University's Watson Institute, the United States alone has invested billions of dollars in aid in Ukraine and Israel, accounting for a significant portion of their GDP.
According to the Costs of War Project at the Watson Institute of International and Public Affairs at Brown University in the US, in the first year of the Iron Swords War, the US invested $17.9 billion in military aid to Israel, amounting to 3.8% of Israel's GDP.
Conclusion
Despite huge defense budgets and significant economic costs, both Ukraine and Israel understand that maintaining security and stability is of paramount importance. However, a balanced approach to the budget is key to avoid a financial crisis and maintain growth in the long term.
“It is important for Israel to prevent the redistribution of resources to the detriment of economic growth,” emphasizes Jerusalem Post.
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