Israel economy grew 1% in 2024, helped by military spending

Israel’s economy posted scant growth in 2024, with the war in Gaza against the Palestinians taking a toll on investment and exports, Reuters has reported.

Boosted mainly by a spike in government spending, particularly on military conflicts, growth was 1 per cent last year, down from 1.8 per cent in 2023 but exceeding the Bank of Israel’s estimate of 0.6 per cent, the Central Bureau of Statistics said in an initial estimate on Monday.

Oz Shimoni, head of the bureau’s macroeconomics division, said that there was no single item that influenced growth data in 2024. “It was many components,” he told Reuters. “That’s why it was up 1 per cent… The 1 per cent increase is only because of government expenses.”

Growth also partly suffered due to a smaller workforce, with tens of thousands of citizens called up for reserve military service.

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The business sector, which excludes government spending, fell 0.6 per cent. On a per capita basis, GDP fell 0.3 per cent to around $40,000, compared with gains of 2.1 per cent in the United States and 0.6 per cent in the UK and Italy.

For the fourth quarter, gross domestic product grew by an annualised 2.5 per cent, below a 5.7 per cent consensus in a Reuters poll. On a per capita basis, GDP gained 1.5 per cent in the quarter.

The weak growth data comes after the bureau reported on Friday that the annual inflation rate jumped to 3.8 per cent in January from 3.2 per cent in December, a figure that will continue to prevent the Bank of Israel from lowering short-term interest rates any time soon.

In 2024, government spending led growth with a 13.7 per cent rise, while consumer spending rose 3.9 per cent. Investment in fixed assets fell 5.9 per cent and exports dipped 5.6 per cent.

In the fourth quarter, state spending grew 7.6 per cent, exports rose 6.2 per cent, consumer spending increased 9.5 per cent and investment jumped 14.7 per cent.

The Bank of Israel estimates growth of 4 per cent in 2025 and 4.5 per cent in 2026.

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