Economy loses notable momentum in the fourth quarter

GDP reading: GDP growth moderated to 2.5% in seasonally adjusted annualized rate terms (SAAR) in the final quarter of 2024 from 5.3% in the third quarter, below market expectations. As such, the economy remained smaller than before the start of war with Hamas in late 2023.

Softer investment growth leads slowdown: Private consumption growth improved to 9.5% SAAR in Q4 compared to a 8.9% expansion in Q3. Government consumption bounced back, growing 7.6% in Q4 (Q3: -3.3% SAAR). In contrast, fixed investment growth slowed to 14.7% in Q4, following the 29.2% increase recorded in the previous quarter. On the external front, exports of goods and services growth hit an over two-year high of 6.2% in the fourth quarter, up from the third quarter's 3.6%. In addition, imports of goods and services growth picked up to 17.2% in Q4 (Q3: +15.7% SAAR).

GDP outlook: Economic growth should accelerate slightly in Q1, buoyed by the recent ceasefire agreements with Hamas and Hezbollah.

Panelist insight: Digging deeper into the latest data, Goldman Sachs analysts said: “According to the seasonally adjusted quarterly data, Israeli growth remains -0.7% below its Q3-2023 (pre-October 7th) level, but there is a significant divergence across the components of GDP. Household consumption is +5.6% higher than in Q3-2023 and (civilian) government consumption is +10.6% higher. Strong household and government consumption is being offset by contracting investment, especially in construction – which remains 20.2% below its pre-October 7 level. Construction spending has been held back by a combination of the uncertainty created by the conflict and a large labour supply constraint that has particularly affected the construction sector (owing to Israel’s labour force losing access to citizens on active military duty and non-resident workers from Gaza and the West Bank).”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Israeli GDP projections for the next ten years from a panel of 23 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Israeli GDP.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Israeli GDP projections.

Want to get access to the full dataset of Israeli GDP forecasts? Send an email to info@focus-economics.com.