Israel flag Israel: Economic outline

Economic Outline

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, 2016

Note: (e) Estimated Data

Monetary Indicators 20162017201820192020
Israeli New Sheqel. (ILS) - Average Annual Exchange Rate For 1 GBP 5.194.634.794.504.41

Source: World Bank, 2015


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Latest Update: July 2024