Israel's Economy Shows Faster Recovery Than Expected, Driven by Government Spending
Translated & summarized from Calcalist by baba
Israel's economy grew by 15.4% annually in the second quarter, a revision upward from previous estimates, according to the Central Bureau of Statistics. The first quarter contraction was also less severe than expected, revised to 1.5%. This growth was primarily fueled by a significant increase in government defense spending, offsetting a downward revision in export figures. The updated data indicates a stronger overall economic recovery than initially reported.
The story in 5 lines · by baba
- Israel's economy grew 15.4% annually in Q2, a revised upward figure from the Central Bureau of Statistics.
- The Q1 economic contraction was less severe than expected, revised down to 1.5% annually.
- Government defense spending increased significantly, driving the upward revision in growth.
- Export growth estimates were revised downward, impacting the composition of economic recovery.
- Private consumption rose 14.6% annually, with durable goods showing strong performance.
Israel's economy experienced a quicker recovery in the second quarter than initially estimated, with growth revised upward to 15.4% annually, according to updated figures from the Central Bureau of Statistics (CBS). This upward revision follows an earlier adjustment in September, which had lowered the estimate to 14.9%.
More significantly, the CBS revealed that the economic contraction in the first quarter, attributed to the "Sword of Iron" war, was less severe than previously thought. The decline was revised to 1.5% annually, down from earlier estimates of 1.7% and 2.2%. This means the economy contracted less in the first quarter and grew more in the second quarter than initially reported.
Consequently, the growth for the first half of 2026 compared to the second half of 2025 is now estimated at 3.7%, an improvement from previous estimates of 3.5% and 3.2%. However, the composition of this growth has shifted. While initial estimates in August projected a 25.2% annual surge in exports (excluding startups and diamonds), this figure was later revised down and now stands at 17.7%. Total exports, including startups, were revised from 35.2% to 26.6%.
The upward revision in overall growth, despite lower export figures, is largely due to increased government spending, particularly in defense. Government expenditure was revised upward from 19.5% to 22.4%, with defense consumption rising from an estimated 14.7% to 20.4%. Growth in production from abroad also contributed to the revised figures. Without this foreign production, domestic growth would have been 13.8%, lower than the initial estimate.
Other economic indicators show mixed trends. Investment in fixed assets weakened, falling to 4.1% from an initial 6.3%. While investment in the ICT sector remained strong with a 152% annual increase, it was down from a previous estimate of 181%. Private consumption rose by 14.6% annually, with durable goods like cars and appliances seeing a significant 29.8% increase per capita. Business sector output, a key driver of private sector growth, is estimated to have grown by 17.7% annually.