Thursday 4 December 2025
Last update on Thursday, December 4, 2025 At 10:45 AM
The cost of living in Israel has increased dramatically over the past fifteen years. Since 2008, Israel has undergone a structural shift: while prices were previously below the OECD average, the country has become one of the most expensive among advanced economies. This increase cannot be explained by growth in GDP per capita or by exchange rate fluctuations, revealing a profound disconnect between macroeconomic fundamentals and the prices observed by consumers.
The State Comptroller noted in 2024 that food prices in Israel (in purchasing power parity) are approximately 51% higher than in EU countries and 37% higher than in OECD countries.
The crux of the problem lies in an exceptional concentration across the entire value chain.
The Israeli market is dominated by industrial monopolies such as Tnuva, Osem (Nestlé), and Strauss-Elite, built through successive acquisitions that have consolidated their power over a wide range of consumer goods; two dominant importers, Diplomat and Schestowitz, which hold exclusive rights to dozens of major international brands; and a highly concentrated distribution network, dominated by Shufersal, which has over 30% market share nationwide and whose gross margins have increased significantly, from 23% to nearly 30% in the last ten years.
This lack of competition results in an erosion of consumers’ purchasing power.
The market structure prevents the entry of new competitors and fosters tacit market-sharing practices among dominant players. The regulator has been criticized for having, over the years, authorized or facilitated mergers that have strengthened these positions, notably the Strauss-Elite merger in the 1990s and 2000s.
Combined with a high interest rate environment and rising taxes since the start of the war, the cost of living is placing a heavy burden on Israeli households. Food accounts for 20% of household spending, but this share varies significantly across income deciles.
In the wealthier income brackets, food expenses represent approximately 10% of income. This figure rises to 33% for the second decile and up to 45% for households in the first decile, making these households highly vulnerable to price increases. Faced with slower wage growth, this situation has led to widespread bank overdrafts at the end of the month, now affecting one in three households.
The “What’s good for Europe is good for Israel” reform aims to reduce prices sustainably but has so far struggled to produce results.
Led by the Ministry of Economy and Industry, the reform aims to facilitate the import of goods that meet European standards, thereby increasing supply on the local market and reducing household expenses by several thousand shekels annually.
The reform has been phased in since January 1, 2025, and the scope of products it covers represents 80% of the value of consumer goods imports. At this stage, the adoption rate among importers remains low and varies depending on the product categories.
According to the Israeli economic think tank IEP, which specializes in cost-of-living studies, the reform’s objective cannot be achieved without a thorough restructuring of the market.
Source: French Embassy in Israel
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