Israeli Economy Shows Resilience Despite Security Challenges, Reports Bank Discount

Despite ongoing security events, including the war, Israel's economy demonstrated reasonable positive growth in the past Hebrew year (Tashpa"v), according to a review by Shmuel Kitzbian, Chief Strategist at Bank Discount. Economic activity grew at a rate comparable to or slightly higher than the average over the decade preceding the "Swords of Iron" war, with the output gap compared to pre-war trends significantly narrowing.

The Tel Aviv 125 stock index saw an exceptional rise of approximately 38% in the past Hebrew year, significantly outperforming global stock indices. Over the last two Hebrew years, the index has cumulatively outperformed global markets by about 46%, a record for consecutive two-year periods since the TA-100 index, the precursor to the TA-125, was launched in early 1992.

The Israeli Shekel also exhibited strong performance for the second consecutive year, outperforming all major global currencies. Its cumulative strengthening against the dollar over the past two Hebrew years reached a record of approximately 21%. This performance notably surpassed consensus forecasts made at the beginning of the Hebrew year, with the Shekel being 11-12% stronger than predicted.

Israel's government bond market also performed favorably compared to Western markets. While yields rose in Western countries, they fell in Israel during Tashpa"v. This trend was supported by factors including interest rate cuts, a reduced deficit, low inflation, and a decrease in Israel's risk premium. The Israeli economy's output growth rate, while difficult to precisely measure for the Hebrew year due to calendar differences, showed a rate of 3.7% or 4.6% depending on the calculation method, indicating a robust performance despite the security situation.