Israel's growth expands at slower pace as grueling war takes economic toll

GDP growth is revised down to an annualized 0.3 percent in the April to June period, as the year-long war with Hamas puts a strain on exports

Israel’s economy grew slower in the months of April to June than previously thought, data showed on Tuesday, as the year-long war in Gaza against the Hamas terror group continued to weigh on growth.

Gross domestic product rose by an annualized 0.3 percent in the second quarter, the Central Bureau of Statistics said in its third estimate, down from 0.7% reported a month ago and from an initial 1.2% published in August. The figure is far below economists’ expectations, which ranged from 2.3% to 5% for the quarter.

The economy was supported by gains in consumer and state spending and in investment in fixed assets, while exports fell during the April to June period.

Last week, the Bank of Israel trimmed its economic growth estimate in 2024 to 0.5% from a prior estimate of 1.5%.

Along with a weakening economy, inflation has spiked and central bank officials have warned of possible interest rate increases. It held rates steady last week for a sixth straight policy meeting.

First-quarter GDP growth was unrevised at 17.2%, as the economy bounced back from a steep contraction in the fourth quarter of 2023 when the war began.

The October onslaught last year saw Hamas terrorists rampage through southern Israel and kill some 1,200 people, mostly civilians, and kidnap 251. The Israel Defense Forces say 97 hostages remain in Gaza, 34 of whom have been declared dead.

Alongside the fighting in Gaza, Iran-backed Hezbollah has launched daily barrages of rockets into northern Israel since October 8, saying it is doing so to support Hamas amid the war there. The fighting in the north steadily escalated over the months, boiling over last month when Israel began a major offensive against the terror group by killing nearly its entire top leadership and launching a ground operation in southern Lebanon.