Israel flag Israel: Economic and Political Overview

The economic context of Israel

Economic Indicators

The Israeli economy has recorded one of the best performances of the OECD countries in recent years, mainly due to an increase in the working-age population and the participation rate. After an abrupt halt due to the COVID-19 pandemic, the Israeli economy resumed its growth path (+6.5% in 2022). The country was performing well in the first part of 2023, with GDP growing around 3% in the first three quarters; however, the evolving conflict following Hamas’ terrorist attacks on Israel on 7 October had a strong economic impact. Therefore, the estimated growth was reduced to around 2% of GDP in 2023 (CBS). In 2024, the outcome hinges on the war's duration and whether the conflict remains confined to Gaza or extends to other areas, such as potential involvement with Hezbollah in southern Lebanon. The security situation and a notable decrease in the civilian labour force, coupled with a decline in economic sentiment, are primarily impacting private consumption and investment due to disruptions in the supply side. Additionally, export growth is expected to be hindered by a decline in tourism.

In 2023, Israel recorded a budget deficit of 4.2% of its gross domestic product, a significant shift from the 0.6% surplus seen in 2022. This change was attributed to heightened state spending, particularly to fund the war against the Palestinian Islamist group Hamas in Gaza (data by the finance ministry). Lawmakers approved a war budget of approximately ILS 30 billion for 2023 and cabinet ministers are deliberating a revised 2024 budget, involving additional funds in the tens of billions of shekels, which is anticipated to raise the budget deficit to around 6% in 2024. In early November, parliament approved a NIS 15 billion (0.8% of GDP) business support package which included grants for businesses near Gaza and Lebanon borders and others based on revenue losses. Support measures extend to evacuated households, simplified access to unemployment benefits, and business liquidity measures like VAT payment postponement and loan guarantees. Israel's public debt-to-GDP ratio amounted to 62.1% in 2023, compared to 60.5% one year earlier. In 2023, Israel successfully raised approximately USD 42.3 billion, highlighting its capacity to secure substantial funds even amid wartime conditions and reflecting a high level of investor confidence in the country (data by the finance ministry). Consumer price inflation, at 3.7% in October, remained above the Central Bank’s 1-3% target range, and inflation developments will depend on the interplay of supply and demand disruptions.

Israel has one of the highest living standards in the region, with salaries in line with the European average (the GDP per capita PPP was estimated at USD 54,771 in 2023 by the IMF). However, around 21% of Israelis live in poverty and inequality is relatively high. Furthermore, households suffer from high real estate prices and costs of living. The Israeli labour market is tight: in the first part of 2023, the labour market was close to full employment (the unemployment rate stood at 3.4% in September). Nevertheless, the outbreak of war with Palestinian Hamas militants led to tens of thousands of displaced citizens, thus the rate spiked to 9.6% in October, as 428,400 people were jobless versus 163,600 in September.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 525.00509.48530.66569.51594.69
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 54,96752,21953,37256,20557,590
General Government Balance (in % of GDP) -0.2-5.3-7.7-5.7-4.4
General Government Gross Debt (in % of GDP) 60.561.967.367.367.8
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) 20.3623.9629.6724.1321.89
Current Account (in % of GDP)

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Israel has a diversified and technologically advanced economy. The agricultural sector employs 1% of the active population, accounting for 1.3% of GDP (World Bank, latest data available). The country has an agricultural land of 638,400 ha (FAO) and its main crops are fruits and vegetables, cereals, wine, and cattle farming. Israel is almost completely dependent on imports to meet its supply of food products: its limited land and water resources preclude agricultural self-sufficiency and affect local production costs and consumer prices; nevertheless, the increasing technological progress and innovation, a high level of investment in R&D, and the potential expansion of water resources are among the primary drivers behind the agricultural sector’s growth. Israel has become a leading agri-tech country, “greening” the desert to grow most of the exported food.

Israeli industry excels in the production of chemical products (Israel specialises in generic medicines), plastics and high-tech (aeronautics, electronics, telecommunications, software, biotechnologies, etc.). Industry as a whole comprises 17.2% of GDP and employs 17% of the workforce (World Bank). Numerous companies, particularly those that produce state-of-the-art technology, have benefited from their ability to secure funding from Wall Street and other international financial centres (Israel ranks second, after Canada, in terms of the number of companies registered on American stock markets). Furthermore, many leading international hi-tech companies have established R&D centres in Israel: companies such as Intel, Microsoft, Cisco, IBM and Apple chose Israel as the site for their first development centres outside of the United States. Other important sectors of activity include textiles and diamond cutting. Overall, the manufacturing sector is estimated to account for 10% of GDP.

The majority of the workforce (82%) is employed in the tertiary sector, which accounts for 72.4% of GDP. Tourism remains significant despite the Israeli-Palestinian conflict: in 2022, 2.675 million tourist entries were recorded (as opposed to only 397,000 in 2021 and 831,000 in 2020, but still 41% below the pre-COVID level), while revenue from incoming tourism stood at about ILS 13.5 billion compared to about ILS 23 billion in 2019. The Israeli economy is also at the forefront of hi-technology services industries. Although highly exposed to the real estate sector, the Israeli banking system is considered stable.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.9 17.0 82.1
Value Added (in % of GDP) 1.3 17.2 72.4
Value Added (Annual % Change) 6.7 6.0 9.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


Find more information about your business sector on our service Market reports.


Find out all the exchange rates daily on our service International currency converter.


Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

See the country risk analysis provided by Coface.

Return to top


Return to top

Any Comment About This Content? Report It to Us.


© eexpand, All Rights Reserved.
Latest Update: July 2024