Could Israel’s election deadlock threaten its resilient economy?
The country's political gridlock leaves unresolved who will address problems beneath robust headline growth figures, including fiscal pressures, high living costs and growing international isolation that economists warn could erode future prosperity.
Israel’s economy has won praise for its resilience through years of conflict, even as wartime growth has masked deeper fragilities. Now, it must withstand political uncertainty following an inconclusive election.
Economic concerns took a back seat to security in Oct. 27’s high-stakes vote, which left neither Prime Minister Benjamin Netanyahu’s bloc nor main challenger Gadi Eisenkot with a governing majority. The long-time Israeli leader is positioned to remain caretaker prime minister during potentially protracted coalition negotiations, with another election possible.
The stalemate is unlikely to derail the economy in the near term and the International Monetary Fund has forecast Israel’s GDP will expand 4.5% in 2026. But it leaves unresolved who will address the problems beneath the robust headline growth figures, including fiscal pressures, high living costs, structural weaknesses and growing international isolation that economists warn could erode future prosperity.
“The question now is, of course, whether the new government, which will be formed somehow, will carry out growth-enhancing policies. This remains to be seen,” Benjamin Bental, an economist with the Jerusalem-based Taub Center for Social Policy Studies, told Al-Monitor. “But the immediate future seems to be very much dependent on the continuation of the trends we have seen over the last two years, despite the war, of a strengthening high-tech sector.”
