Panorama econòmic

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 and was performing well in the first part of 2023; however, the evolving conflict following Hamas’ terrorist attacks on Israel on 7 October had a strong economic impact. Israel's economy grew by 1% in 2024, according to the Central Bureau of Statistics' National Accounts report. A rebound in consumption helped avoid a deeper growth slump, with private consumption rising 3.9% year-on-year and public consumption increasing 13.7%, driven by government spending related to the conflict. According to the OECD, growth is projected to rise to 2.4% in 2025 and 4.6% in 2026, with demand composition shifting over time. Export growth is expected to pick up gradually, especially from the second half of 2025, including in high-tech services. Private consumption is expected to follow a similar trend. Government consumption will shift from supportive to restrictive. Investment will remain constrained by labour shortages, particularly in construction.

After a strong impulse, with the budget balance shifting from a surplus in 2022 to an estimated 7.5% of GDP deficit in 2024, fiscal policy is set to tighten by over 2% of GDP in 2025-26. Despite continued high military spending in 2025, the government plans to reduce the deficit by raising taxes and cutting civilian expenditures. Tax hikes include permanent measures like a 1% increase in the VAT rate, alongside more challenging changes such as income-tax threshold freezes. Defence spending is expected to decrease from mid-2025, though it will remain a higher share of GDP than before the war. The central bank is expected to keep the policy interest rate at 4.5% throughout the projection period. Israel spent ILS 100 billion (28 billion USD) on military conflicts in 2024, according to the finance ministry. This spending has significantly increased government borrowing and the country's debt burden. The ratio of public debt to GDP rose to 69% at the end of 2024, up from 61.3% in 2023 (official figures). Over the past two years, the ratio has increased by 9 percentage points, mainly due to Israel’s wars with Palestinian militant groups Hamas in Gaza and Hezbollah in Lebanon. Meanwhile, Israel’s inflation ended 2024 at 3.2%, up from 3% in 2023, according to the Central Bureau of Statistics. Officials attribute the inflation spike to war-related supply issues, while the central bank notes that demand also contributes to keeping prices high. Inflation is projected to rise to 3.6% in 2025, driven partly by the VAT increase (to 18%), before easing to 2.9% in 2026 as supply constraints improve (OECD data).

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 54,446 in 2024 by the IMF). The poverty rate in Israel slightly decreased from 20.8% in 2022 to 20.7% in 2023. However, relative poverty remains among the highest in the OECD, despite a consistent downward trend over the past decade. The unemployment rate remained at historic lows, standing at 2.6% at the end of 2024 — the lowest since the 1970s (data CBS), which points to a tight labour market, leading to a severe shortage of workers. Since work permits for Palestinians were suspended, few new foreign workers (0.4% of employment) have entered Israel, compared to 4% of employment before the war.

Vols fer algun comentari sobre aquest contingut? Escriu-nos.