Israeli Economy Shows Resilience Amid War, Tech Sector Leads Growth
Translated & summarized from Al-Shams by baba
Israel's economy has shown resilience amid war, with the high-tech sector driving growth and foreign investment reaching record levels. Accountant Maged Karam reported that GDP is projected to grow around 3% in 2025, surpassing many major economies. However, the war incurs significant costs, estimated at 350 billion shekels, and rising living expenses are eroding citizens' purchasing power. A recent survey indicates that the economy and cost of living are primary concerns for both Jewish and Arab voters in Israel.
The story in 6 lines · by baba
- Israel's economy shows resilience with projected 3% GDP growth in 2025, led by the high-tech sector.
- Foreign direct investment reached a record $14 billion in Q1 2026, reflecting global demand for Israeli tech.
- The war's estimated cost is 350 billion shekels, with potential for increased defense spending.
- Economy and cost of living are top concerns for 38% of Jewish and 46% of Arab Israeli voters.
- Rising prices are eroding purchasing power despite high economic growth rates.
- Accountant Maged Karam highlighted the economic challenges and survey findings on public concerns.
Despite ongoing conflict, the Israeli economy has demonstrated resilience over the past three years, with GDP growth projected at around 3% for 2025, following a 1% increase in 2024, according to accountant Maged Karam. He noted that the economy grew by 3.2% in the first half of the current year, and the Bank of Israel anticipates 4% growth in 2026. This performance surpasses growth rates in major economies like the US, UK, France, Canada, and Japan, largely driven by the high-tech sector, which accounts for approximately one-fifth of economic activity and benefits from global demand in cybersecurity and AI.
Foreign direct investment also saw a significant surge, reaching about $26 billion last year, a 78% increase from 2024. Investment continued into 2026, with a record quarterly inflow of $14 billion in the first quarter alone. Karam stated that these figures reflect strong global demand for Israeli technology but cautioned that not all sectors or citizens benefit equally from this growth.
The war, however, imposes substantial financial burdens. The Bank of Israel estimated war costs at approximately 350 billion shekels in March, excluding later conflicts. Karam highlighted that military expenditures are likely to rise with potential increases in the defense budget, raising questions about the economic impact of continued military operations.
While the government focuses on positive growth and investment indicators, Karam emphasized that the economic picture also includes the high cost of living and disparities between economic growth and citizens' daily realities. A recent survey by the Israel Democracy Institute revealed that the economy and cost of living are top concerns for 38% of Jewish Israeli voters and 46% of Arab citizens.
Karam interpreted these survey results as a clear message to political parties that Arab citizens are concerned with economic conditions and rising prices, not solely with crime and violence. He urged parties to address economic issues in their election platforms, noting that Israel is among the OECD countries with a high cost of living. Despite robust economic growth, rising prices are eroding purchasing power, leading to increased economic pressure on citizens.
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