GDP in Israel

Israel GDP

GDP growth improves in the second quarter

GDP growth accelerated to 3.0% in seasonally adjusted annualized rate terms (SAAR) in the second quarter, up from 2.9% in the first quarter and beating market expectations. Moreover, Israel outperformed most other developed economies in the period; the U.S. saw growth of 2.4% and the Euro area just 1.0%.

Household spending grew 1.9% SAAR in Q2 compared to a 1.4% expansion in Q1, supported by lower inflation and unemployment and a notable rise in the population. Public spending improved to a 3.6% expansion in Q2 (Q1: +0.7% SAAR). Meanwhile, fixed investment was down 1.1% in Q2, contrasting the 13.6% expansion in the prior quarter and likely weighed on by higher interest rates and uncertainty linked to judicial reform. In particular, machinery and equipment investment in the tech sector was down by nearly a fifth.

On the external front, exports of goods and services fell 2.6% on a SAAR basis in the second quarter, which was above the first quarter’s 3.8% contraction. Conversely, imports of goods and services declined at a more pronounced pace of 11.2% in Q2 (Q1: -8.2% SAAR), marking the worst reading since Q2 2020.

The Consensus is currently for another solid economic expansion in Q3, buoyed by strong growth in the population. That said, judicial reform uncertainty will continue to weigh on investment—particularly in the tech industry.