After it ends, the war in Gaza will still continue to shape Israel

Israel’s generals are calling 2024 a “year of warfare”. That is quite a prediction, given the bloodshed of 2023. They believe it will take many months to dismantle Hamas’s military capabilities. For now, Israel’s focus remains on its immediate battles in Gaza and the fate of the more than 130 hostages still held there. But it is increasingly obvious that even after the fighting ends, the impact of this war will be felt for years on Israel’s military strategy and by extension on its economy.This is Israel’s worst war in half a century in terms of casualties and its most prolonged since the conflict in 1948-49 which the country calls its War of Independence. Economists refer to the years between the Yom Kippur war in 1973 and Israel’s invasion of Lebanon in 1982 as its “lost decade”. Defence spending soared, as did the deficit and inflation while foreign investors stayed away. Israel escaped financial meltdown only by enacting a drastic economic stabilisation plan in 1985. Though there are huge differences between Israel’s economy now and then, from its world-leading tech sector to its ample foreign reserves, some Israelis worry that a protracted war could be a long-term drag on growth.