Israel's Official 3.2% Growth Figure Skewed by Overseas Tech Activity

Israel's Ministry of Finance has published a report highlighting a 3.2% economic growth for the year, framing it as a sign of a strong economy. However, a closer examination reveals that this figure is significantly inflated by a specific accounting practice related to the export of goods that never physically enter Israel.

The Central Bureau of Statistics (CBS), which compiles the data, also presents a secondary figure that offers a more realistic picture. When a particular item in national accounting is excluded, specifically, goods developed in Israel but manufactured and sold abroad by Israeli-registered companies, the growth rate for the first half of 2026 drops from 3.2% to just 1%.

This accounting item, "goods sold abroad that do not cross the country's borders," has historically been minor. However, it surged dramatically in 2025 and the first half of 2026, largely due to companies like Nvidia, which acquired Israeli firm Mellanox. Nvidia continues to register intellectual property and related revenues in Israel for products manufactured and sold overseas. This artificially boosts Israel's export and GDP figures.

Economists and financial institutions, including Bank of Israel and J.P. Morgan, have acknowledged this phenomenon. Bank of Israel noted that much of the recent growth stems from global companies' overseas production, and J.P. Morgan estimates that this type of production accounts for about half of Israel's GDP expansion over the last three years. The Ministry of Finance's report is criticized for presenting this inflated growth as a standalone achievement without adequately disclosing the impact of this accounting adjustment, which does not reflect actual economic activity, employment, or production within Israel.