Israel Rises to 25th in World's Largest Economies Despite Ongoing War

Despite a protracted war, significant defense spending, and political upheaval, Israel has climbed to 25th place in the global ranking of largest economies, up from 27th last year. The International Monetary Fund (IMF) projects Israel's Gross Domestic Product (GDP) to reach $747 billion this year, a 21% increase from $617 billion in 2023. This places Israel ahead of countries like Sweden, Ireland, Singapore, and the UAE. Furthermore, Israel is expected to rank among the top OECD nations for GDP per capita, estimated at $72,400.

The economic ascent is attributed to a combination of real economic growth, a strengthening Israeli shekel, and the relative nature of the ranking system. The IMF forecasts Israel's economy to grow by 4.5% in 2026, with the high-tech and defense industries leading the expansion. While real growth is a factor, the significant jump in dollar-denominated GDP is largely due to currency appreciation. A stronger shekel increases the dollar value of economic activity even if the volume of goods and services remains unchanged. The shekel appreciated by 6.7% against the dollar in 2025 and a further 5.9% in the second quarter of 2026, contributing to an overall projected dollar GDP increase of approximately 21% for the year.

The ranking is also relative; a weaker currency or slower economic growth in competing nations can improve Israel's position. The gap between Israel and Sweden, ranked 26th, is less than $2 billion, indicating that currency fluctuations can continue to influence the rankings. However, the article notes a distinction between a large economy and a strong one. Nominal GDP reflects the overall economic activity in dollar terms but doesn't necessarily indicate the standard of living, cost of living, social inequality, or the state of public finances. The IMF projects Israel's budget deficit to be 5.8% of GDP this year, with public debt reaching approximately 68.8% of GDP. The economy also faces challenges such as labor shortages, productivity gaps, and high defense expenditures. Some of the GDP growth is also attributed to the overseas operations of Israeli companies, particularly in the tech sector, which may not directly translate to domestic job and production expansion.

Despite these caveats, Israel's rise in the global rankings highlights its economic scale and resilience during a period of significant security challenges. The key question for the coming years is whether Israel can translate this growth and high-tech success into improved living standards for all its citizens, rather than just a higher position in global economic tables.