The Israeli finance minister stated: "We are in the longest and most expensive war in Israel's history," but even as he uttered this sentence, his calculations were wrong, and the real calculations are much greater than those he announced at the time.
There is an important research paper published about three weeks ago in the leading scientific journal in defense economics, prepared by Dr. Khalid Al-Mawazini and Ali Bulat and modified by Behzadi.
The title of the paper is: "In Light of Stiglitz and Bilmes (2008): The Real Cost of the Gaza War to Israel."
This paper addresses the comparison of the true costs of the war on Gaza using a scientific framework, confirming that the actual costs are approximately three times higher than the official estimates, with large implicit and future costs.
The research aims to estimate the true cost of the Gaza war from a comprehensive economic perspective, including direct and indirect costs and those expected in the future.
In short, the paper adopted a framework that divides costs into three main categories: budgetary costs, microeconomic costs, and macroeconomic costs.
It then added future costs and long-term commitments so that we could see a broader comprehensive picture beyond merely calculating the official direct burdens.
As for the direct costs, the official estimates (from the Israeli Ministry of Finance and Bank of Israel) ranged from approximately $54 billion to $68 billion as the direct cost of the war.
However, their calculations indicate that these figures do not take future costs into account, which if added would bring the true cost closer to $212.8 billion, more than three times the official estimates.
The researchers divided the timeline of defense expenditures until 2025 into several items: civilian spending, direct damage, future alternatives such as military spending over the next ten years, treatment costs, and financial support for veterans during the same period. All of this gives us a total estimated direct cost of about $104.2 billion and an additional $104.2 billion in other contexts.
The indirect costs were divided into productivity losses, declines in tourism, loss of foreign direct investment, in addition to projects that were halted or canceled. The approximate total for this category was about $108.6 billion.
For example, the loss of tourism led to a loss of about $5.5 billion, while the loss of foreign investment and freezing of major projects – such as the suspension of the "Intel" factory construction in Israel – caused losses estimated at about $25 billion. This, in addition to productivity losses resulting from the mobilization of reserve forces, home care expenses for the injured, and others, are all indirect and long-term costs.
After totaling the direct, indirect, and potential future costs, the research concluded that the total economic cost of the war is approximately $212.8 billion.
It is an extremely large figure, almost equivalent to two-thirds of the size of Egypt's economy and exceeding half the size of Israel's economy.
Moreover, the paper demonstrates that even their calculations were conservative, and that there are qualitative costs that cannot be precisely quantified, such as damage to international reputation and its potential effects on exports and international cooperation in the long term, yet they did not factor in that cost due to the difficulty of estimating it accurately.
Most importantly, the paper predicts an increase in the government budget deficit as a percentage of GDP, rising foreign debt, and inflation in the coming years, which reinforces the rationale for adopting a comprehensive cost accounting approach instead of focusing solely on the direct costs officially announced by Israel.
It is worth noting that the paper uses the Stiglitz & Bilmes (2008) framework in the measurement process, which includes the hidden and ongoing costs that only emerge when factoring in long-term obligations and overall economic impacts on the national level (macroeconomic/national scale), thus providing a comprehensive and integrated picture compared to official government reports.
This is an AI-generated English translation. The original text is in العربية
PhD Researcher in Defense Contracting and Cooperation Policies