Jerusalem, 17 March, 2026 (TPS-IL) — The Bank of Israel said that Israel’s fiscal policy during the war, which began on October 7, has supported domestic demand despite recent tax hikes. According to its 2025 report, the sharp increase in defense spending at the war’s outset generated a strong “fiscal impulse,” a measure of how government actions affect economic activity.
While the fiscal impulse eased later in the year due to higher taxes, it remained above pre-war levels. The Bank highlighted that this reflects the government’s efforts to balance defense needs with broader economic stability, using spending, transfers, and investment to offset the impact of the conflict on the economy.