Israel's Economy Shows Growth Despite War, Foreign Investment Surges

Israel's Ministry of Finance has released economic data indicating a resilient economy despite the ongoing conflict. The Gross Domestic Product (GDP) grew by 3.2% in the first half of 2026 compared to the latter half of 2025. Foreign investments saw a significant surge of 78% in 2025, reaching $26 billion, a trend that continued into the first half of 2026.

Inflation has decreased to 1.5% from 2.5% a year prior, falling within the lower range of the target. The national debt-to-GDP ratio stands at 67.9%, considerably lower than the OECD average of 111%. Credit ratings from S&P and Fitch remain at 'A', while Moody's maintains its rating at 'Baa1'. The country's risk premium (CDS) has fallen by 29%, nearing pre-war levels, and yields on ten-year bonds have decreased by 7.2%, lowering the cost of government borrowing.

The labor market shows an unemployment rate of 3.3%, below the OECD average of 4.9%. However, the labor force participation rate for those 15 and older is 62.5%, slightly above the OECD average of 61%. The employment rate for individuals aged 15 to 64 is 71%, lagging behind the OECD average of 74%, a factor the Ministry of Finance links to the GDP per capita, which is approximately $60,000 in purchasing power parity terms, compared to the OECD average of $64,000.

In the technology sector, particularly artificial intelligence, Israel ranks third globally in AI trade, sixth in development, and seventh in research out of 83 countries. The high-tech industry also experienced a 53.6% increase in capital raising. The government deficit has been reduced to 3.3% from 4.7% over the past year, with the target for 2026 set at 4.9%. The Ministry noted that the deficit might slightly increase in the coming months.