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 540 billion in 2024.
Nominal GDP of USD 511 billion in 2023.
GDP per capita of USD 52,368 compared to the global average of USD 10,589.
GDP per capita of USD 54,327 compared to the global average of USD 10,589.
Average real GDP growth of 3.5% over the last decade.
Average real GDP growth of 3.9% over the last decade.
Sector Analysis
In 2021, services accounted for 72.4% of overall GDP, manufacturing 10.2%, other industrial activity 16.1%, and agriculture 1.3%. Looking at GDP by expenditure, private consumption accounted for 48.2% of GDP in 2023, government consumption 22.4%, fixed investment 25.7%, and net exports 3.7%.International trade
In 2022, manufactured products made up 87.0% of total merchandise exports, mineral fuels 5.3%, food 3.9%, ores and metals 1.4% and agricultural raw materials 0.6%, with other categories accounting for 1.8% of the total. In the same period, manufactured products made up 74.2% of total merchandise imports, mineral fuels 11.6%, food 10.1%, ores and metals 1.4% and agricultural raw materials 0.8%, with other goods accounting for 1.9% of the total. Total exports were worth USD 70.20 billion in 2024, while total imports were USD 96.50 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
Q4’s GDP growth was recently revised down from 2.5% to 2.0% in quarter-on-quarter annualized terms, leaving the economy slightly smaller than before war with Hamas began in October 2023. Our Consensus is for GDP growth to have accelerated in Q1, buoyed by ceasefires reached with both Hamas and Hezbollah. Available data supports this prediction: In January–February, economic activity growth picked up compared to the fourth quarter. In politics, the ceasefire with Hamas expired in late March, and Israel’s government is reportedly readying plans to occupy large parts of the Gaza Strip. Such an outcome would likely translate into higher defense spending while simultaneously constraining labor supply and private spending. Also in March, the cabinet passed a no-confidence vote against the attorney general, a sign of the administration’s desire to rein in independent judicial oversight.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.