Israeli Economy Rebounds Strongly in Q2 2026 with 15.4% Annual Growth

The Central Bureau of Statistics (CBS) released Israel's national accounts data for the second quarter of 2026, revealing a significant economic recovery following the "Lion's Roar" military operation. The economy grew by 15.4% on an annualized basis (3.6% quarterly), rebounding from a 3.8% annualized decline (1% quarterly) in the first quarter. This sharp growth largely reflects postponed economic activity from the war-affected first quarter now taking place in Q2. The business sector showed even stronger growth at 16.6%.

When comparing the first half of 2026 to the second half of 2025, GDP rose by 3.2%, indicating moderate overall growth. However, if the second half of 2026 matches the first half's performance, the annual growth rate may fall short of the 4% forecast by the Bank of Israel and the Ministry of Finance. Business sector output grew by 4.7% in the first half.

Public consumption was the main driver of Q2 growth, surging 19.5% annually and 4.6% quarterly, due to the government budget approval only at the end of Q1. This government spending boost is considered less stable growth. Over the half-year, public consumption growth was minimal, while private consumption declined by 0.4%, suggesting a slowdown in economic activity.

Exports recovered strongly with a 25.2% annual increase in Q2, but fixed asset investments grew more modestly by 6.3% annually (1.5% quarterly) and 10.6% over the half-year. These mixed indicators highlight a complex recovery phase for Israel's economy in 2026.