Contrary to wide expectations, Israel’s economy did not collapse in 2024, despite fighting a seven-front war for survival.
The GPD grew four percent in the third quarter last year, with a 0.3 percent rise in the consumer price index reported in December 2024.
The Bank of Israel has projected the GDP will grow by four percent in 2025, and growth will continue by 4.5 percent in 2026.
Along with positive growth in the overall GDP, however, business output declined by 0.6 percent in 2024 while government spending on public needs rose by 13.7 percent due mostly to war expenses.
Defense spending rose by 43.3percent, in comparison to a 4.2 percent rise in civilian spending.
Nevertheless, the national business trends assessment survey showed the “state of business” and expectations on business development in the final quarter of 2024 rose by 14 percent in October and kept rising to a high of 21.75 percent in December.
According to the Bank of Israel, the economy is recovering at a moderate pace, with a stable inflation rate standing at 3.4 percent. The Bank has projected a 2.6 percent inflation rate in 2025, and 2.3 percent inflation in 2026.
“Taxation changes, particularly the increase in VAT, alongside continued supply constraints combined with surplus demand, are expected to raise the pace of inflation in the first half of the year, following which inflation is expected to moderate to within the target range in the second half,” the Bank said in a statement on its website.
Although the labor market remains tight, there has been a slight decrease in unemployment accompanied by moderate wage increases.
The shekel has risen against the US dollar by 0.5 percent, and by 2.4 percent against the euro.
