Economic growth slows during 2024’s final quarter

Israel’s economy grew at a slower pace in the October-to-December period versus the previous three months, preliminary data by the Central Bureau of Statistics shows, as war with the Hamas terror group and the intensified fighting with Iran-backed Hezbollah continued to take a toll on public spending and exports.

Gross domestic product grew at an annualized 2.5 percent in the fourth quarter, according to an initial estimate by the statistics bureau, after expanding at a pace of 5.3% in the third quarter and following a contraction of 0.3% in the second quarter.

Business growth increased 3.1% during the fourth quarter. In the full year of 2024, the economy expanded at a growth rate of 1%, slowing down from 1.8% in 2023 and 6.3% in 2022, before the outbreak of the war with Hamas.

The Bank of Israel recently revised its growth forecast for 2024 to 0.6%, and 4% in 2025. The Finance Ministry’s most recent forecast saw growth of just 0.4% in 2024, and 3.8% in 2025.

Meanwhile, 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 says.

Consumer spending, one of the main drivers of economic activity, increased 9.5% in the fourth quarter of 2024, and investment in fixed assets soared 14.1% while exports of goods and services declined 0.2%. Meanwhile, public spending increased 7.6%.

In 2024, public 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.

Investment in fixed assets dropped 5.9% following a decline of 1.8% a year earlier. Exports fell 5.6% in 2024 versus a decline of 1.1% in 2023.

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 on October 7 that year sharply curtailed consumer spending, trade and investment.