Israel's Economy Shows Resilience Amid War, Reports Indicate Growth

Israel's economy has demonstrated significant resilience and adaptability despite an ongoing armed conflict and macroeconomic turbulence, according to a report from the Ministry of Finance. In the first half of 2026, the country's real Gross Domestic Product (GDP) grew by 3.2% compared to the latter half of the previous year. This growth is attributed to the business environment's high adaptability.

The investment sector saw a notable surge, with direct foreign investment increasing by 78% in 2025 to reach $26 billion, a positive trend that has continued into 2026. Inflationary pressures have eased, falling from 2.5% to 1.5%, settling at the lower end of the Central Bank's target range. The national financial market has strengthened, with the Israeli shekel appreciating 11% against the US dollar and the TA-125 stock index rising 35%.

Fiscal discipline has improved, as evidenced by a reduction in the state budget deficit from 4.7% to 3.3%, with a target of 4.9% set for the current year. The national debt-to-GDP ratio remains at a safe 67.9%, significantly lower than the OECD average of 111%. Global markets show confidence, reflected in a 29% decrease in the sovereign risk premium (CDS) and a 7.2% drop in the yield of ten-year government bonds, lowering borrowing costs. Major credit rating agencies like S&P, Fitch, and Moody's maintain stable investment-grade ratings for the country.

The labor market remains stable with an unemployment rate of 3.3%, below the OECD average of 4.9%. The high-tech sector continues to be a primary economic driver, with venture capital in high-tech areas growing by 53.6% in the first half of 2026. Israel also maintains a leading global position in artificial intelligence, ranking third in AI commercialization. The nominal GDP per capita is projected to reach $70,000 by the end of the year.