Israeli economy grew 1% as spending on war effort rose, exports and investment fell
Growth in 2024 exceeded central bank and Finance Ministry forecasts as government expenditure on war needs soared 13.7% and consumer spending rose 3.9%
Sharon Wrobel is a tech reporter for The Times of Israel
The economy expanded at a slower pace in the October-to-December period, but it still grew by 1 percent in 2024, surpassing forecasts as the war with the Hamas terror group and fighting with Iran-backed Hezbollah increased government spending on military and civilian needs and took a toll on the country’s exports and investments.
Gross domestic product grew at an annualized 2.5% in the October to December period, according to an initial estimate by the Central Bureau of Statistics, after expanding at a pace of 5.3% in the third quarter and following a contraction of 0.3% in the second quarter.
In the full year of 2024, the economy’s growth rate slowed to 1%, down from 1.8% in 2023 and 6.3% in 2022, before the outbreak of the Hamas war. The initial GDP estimate for 2024 exceeded the Bank of Israel’s growth forecast of 0.6% and the Finance Ministry’s most recent projection of a mere 0.4%.
On a per capita basis, when adjusted for population growth, GDP contracted 0.3% in 2024, following a contraction of 0.1% in 2023, the statistics bureau said.
“Increased government spending on the war effort in 2024, including purchases of military equipment, reserve duty, evacuation of citizens, and hotel stays, supported growth in the economy, while more Israelis remained in the country, which in turn fueled consumer spending,” IBI investment house Rafi Gozlan told The Times of Israel. “At the same time, the figures showed that during the war year trade, investments and exports of businesses were weaker.”
Business sector output in 2024 declined 0.6%, according to statistics bureau data. Investment in fixed assets dropped 5.9% following a decline of 1.8% a year earlier. Exports of goods and services fell 5.6% in 2024 versus a decline of 1.1% in 2023. Consumer spending, one of the main drivers of economic activity, rose 3.9%.
Monday marked the 500th day since the October 7, 2023, Hamas onslaught, when the group’s terrorists burst into southern Israel, killing some 1,200 people and abducting 251 to the Gaza Strip. On January 19, a hostage-ceasefire deal came into effect. Hamas and Israel are currently implementing the first 42-day phase of the deal.
The economy bounced back at the start of 2024, following a 20.8% contraction in the last quarter of 2023 as the outbreak of war with Hamas in Gaza sharply curtailed consumer spending, trade, and investment.
In 2024, government spending jumped 13.7% following an increase of 7.9% in the previous year. Spending on defense needs soared 43.3% in 2024 after rising 24% in the previous year.
Fourth-quarter data showed some early signs of a recovery. In the last three months of 2024, consumer spending increased 9.5%, and investment in fixed assets soared 14.1%, while exports of goods and services declined 0.2%. Government spending on public needs increased 7.6%. Business growth expanded 3.1% during the fourth quarter.
