Israel's economy grew 1% in 2024, above expectations

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This figure reflects negative GDP per capita growth of 0.3%, because of population growth last year, the Central Bureau of Statistics reports.

Despite the war Israel's GDP grew by 1% in 2024, above initial forecasts, the Central Bureau of Statistics reports in its first assessment. However, this figure reflects negative GDP per capita growth of 0.3%, because of population growth last year, after negative GDP per capita growth of 0.1% in 2023.

The data indicate a continued recovery in the last quarter of 2024, with growth of 2.5% on an annualized basis, following a jump of 5.3% in the third quarter. However, the Central Bureau of Statistics notes that the GDP level is still lower than the pre-war period. The final growth figures for 2024 are higher than the latest forecasts of economic institutions. The Ministry of Finance expected growth of 0.4%, the Bank of Israel estimated 0.6%, and the OECD also expected 0.6%. Credit rating agency Moody's estimated a low growth of 0.5%, and its rival S&P was the most pessimistic with a forecast of zero growth.

Damage to business sector activity

Along with positive growth in the overall level of GDP, there has been significant damage to key industries and business sector activity. Business output recorded a decline of 0.6% in 2024, with overall growth in the economy supported mainly by a sharp increase of 13.7% in government spending for public needs, which was largely due to war expenses. Defense spending jumped by 43.3%, while civilian spending increased by only 4.2%.

The construction sector was severely hit, with a sharp decline of 13% in the sector's GDP, against the backdrop of the severe shortage of workers during the war. Investments in residential construction fell by 17.5%, following a decline of 8% in the previous year. The tech sector was also hit, with a 4.3% decline in the information and communications sector's GDP.

Some signs of recovery were evident in the fourth quarter of 2024: the 2.5% annualized growth was driven primarily by a 9.5% jump in private consumption by and a 14.7% increase in fixed asset investment. However, part of the increase in private consumption is attributed to bringing forward vehicle purchases ahead of tax hikes in early 2025, the Central Bureau of Statistics noted.

Published by Globes, Israel business news - en.globes.co.il - on February 17, 2025.

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