Israel’s economy sees biggest slowdown among OECD countries as war drags on
The rate of economic growth shrank to 0.3% in the April-June quarter from 4.1% in the previous quarter, compared to steady overall growth of 0.5% in the OECD
Sharon Wrobel is a tech reporter for The Times of Israel.
Israel’s economy suffered the biggest slowdown in the April to June period among 38 member countries in the Organisation for Economic Co-operation and Development (OECD), as the ongoing war with the Hamas terror group and heightened tensions with the Hezbollah on the northern front continue to take a heavy toll on the country.
Israel “experienced the most significant slowdown with quarter-on-quarter GDP growth falling from 4.1% in Q1 to 0.3% in Q2,” the OECD said in a report released on Thursday. Meanwhile, the overall GDP growth rate for the OECD remained unchanged in the second quarter of 2024, at 0.5%, the organization said.
The OECD, a club of largely wealthy nations (including Israel), said that growth in the US economy rose from 0.4% in the first quarter to 0.7% in the second quarter. Growth in Japan increased by 0.8% in the quarterly period, following a contraction of 0.6% in the first quarter. In Germany, the economy contracted slightly by 0.1% in the second quarter following 0.2% growth in the previous quarter.
Back in May, the OECD cut its growth forecast for the Israeli economy for this year to 1.9% from 3.3% as the organization warned that the fighting with Hamas has deeply hit the Israeli economy forcing the government to deal with ballooning war-related costs and expenditure. It sees economic growth rebounding to 4.6% in 2025. The OECD is expected to release its next update on the performance of the Israeli economy in December.
The Bank of Israel lowered its 2024 growth forecast to 1.5%, while the Finance Ministry sees growth of 1.9% for this year.
Figures released by the Central Bureau of Statistics earlier this week showed that the economy grew at a much slower pace in the second quarter of the year, falling short of economists’ forecasts, as the fallout from the war hit exports and investments.
The economy had bounced back at the start of the year, growing by a quarterly 4.1% in the first three months of the year following a 5.6% contraction in the last quarter of 2023, when the outbreak of war with Hamas in Gaza following the October 7 onslaught sharply curtailed consumer spending, trade, and investment.
The October massacre saw Hamas terrorists rampage through southern Israel and kill some 1,200 people, mostly civilians, and kidnap 251. Alongside the fighting in Gaza, Iran-backed Hamas ally Hezbollah has launched daily barrages of rockets into northern Israel for the past 10 months, trading fire with Israeli forces and fueling fears that the terror group’s attacks could escalate into a full-blown war.
The military call-up of tens of thousands of reservists who joined the fighting, and the displacement of residents and families from southern and northern communities have been causing disruptions in the country’s workforce and the day-to-day operations of businesses.
