Israel Economic Outlook
A high-tech and innovation-driven economy:
Israel has one of the most advanced and diversified economies in the Middle East, with strong technology, defense, and financial services sectors. The country is a global leader in cybersecurity, artificial intelligence, and medical technology, benefiting from a highly skilled workforce and strong research and development investment. The presence of multinational corporations and a thriving startup ecosystem has made Israel a hub for innovation.
Strong export sector and global trade ties:Israel’s economy is heavily export-driven, with key markets in the U.S., Europe, and Asia. High-tech goods, pharmaceuticals, and defense technology are major contributors to exports. Despite regional geopolitical tensions, Israel has expanded trade partnerships in recent years through the Abraham Accords, strengthening ties with Gulf nations. However, political instability and conflicts continue to pose risks to investor confidence.
Challenges in inequality, cost of living and war:While Israel’s economy is strong, it faces challenges related to income inequality and high living costs, particularly in housing. The country has one of the highest costs of living in the OECD, with wages not keeping pace with housing prices and essential goods. Additionally, structural issues in labor market participation, particularly among certain religious and minority communities, remain concerns for long-term growth. Thirdly—and perhaps most importantly—recent conflict with Hamas and Hezbollah has severely dented Israel’s economic activity.
Israel’s economic outlook:Israel’s economic trajectory should be strong in the long term amid growth in technology, defense exports, and financial services. However, domestic political uncertainty, regional security risks, and social tensions could impact investor confidence and economic stability. Maintaining Israel’s competitive edge in innovation while addressing economic disparities will be key to long-term prosperity.
Israel's Macroeconomic Analysis:
Nominal GDP of USD 511 billion in 2023.
GDP per capita of USD 52,368 compared to the global average of USD 10,589.
Average real GDP growth of 3.9% over the last decade.
Sector Analysis
In 2021, services accounted for 72% of overall GDP, manufacturing 10%, other industrial activity 17%, and agriculture 1%. Looking at GDP by expenditure, private consumption accounted for 48% of GDP in 2023, government consumption 22%, fixed investment 26%, and net exports 4%.International trade
In 2021, manufactured products made up 87% of total merchandise exports, mineral fuels 5%, food 4%, ores and metals 1% and agricultural raw materials 1%, with other categories accounting for 2% of the total. In the same period, manufactured products made up 74% of total merchandise imports, mineral fuels 12%, food 10%, ores and metals 1% and agricultural raw materials 1%, with other goods accounting for 2% of the total. Total exports were worth USD 73 billion in 2023, while total imports were USD 93 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 3.9% in the decade to 2023. To read more about GDP growth in Israel, go to our dedicated page.
Fiscal policy
Israel's fiscal deficit averaged 3.4% of GDP in the decade to 2023. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 4.3% in the decade to 2024. For more information on Israel's unemployment click here.
Inflation
Inflation averaged 1.3% in the decade to 2024. Go to our Israel inflation page for extra insight.
Monetary Policy
Israel's monetary policy rate ended 2024 at 4.50%, up from 0.25% a decade earlier. See our Israel monetary policy page for additional details.
Exchange Rate
From end-2014 to end-2024 the shekel strengthened by 8.3% vs the U.S. dollar. For more info on the shekel, click here.
Economic situation in Israel
GDP growth slowed to 2.5% in quarter-on-quarter annualized terms in Q4 2024 from 5.3% in Q3, below market expectations and leaving the economy smaller than before the outbreak of war with Hamas. In Q4, readings for exports plus private and government consumption improved relative to Q3, while fixed investment growth slowed sharply. The economy is expected to be gaining steam in Q1 thanks to the recent ceasefires reached with both Hamas and Hezbollah. Available data is positive: In January, economic activity grew 0.6% month on month thanks to increases in industrial production and services. However, a VAT hike, still-high interest rates and ongoing labor shortages will be capping economic momentum in Q1. In politics, the first phase of the Israel-Hamas ceasefire expired at the start of March; fighting could resume if a further deal is not agreed.Israel Economic Forecasts
Projections out to 2034.49 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 22 expert analysts.
Want to get insight on the economic outlook for Israel in the coming years? FocusEconomics collects projections out to 2034 on 49 economic indicators for Israel from a panel of 22 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Israel economy. To download a sample report on the Israel's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.