Israel’s GDP growth slows in Q4 2024, labor market remains tight

ISRAEL - In Brief 18 Feb 2025 by Sani Ziv

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The initial estimate for the fourth quarter of 2024 reveals a slowdown in Israel’s GDP growth to 2.5%, down from an upwardly revised 5.3% in the previous quarter, according to initial estimates from the Central Bureau of Statistics. GDP fell sharply in Q4 2023 after the economy almost shut down due to the war. While it rebounded in Q1 2024 and continued expanding through the second, third, and fourth quarters, it remained 0.7% below pre-war levels and 2.6% below potential growth. Net trade weighed heavily on the GDP in the fourth quarter, as imports surged 17.2% (vs. 15.7%), while exports grew at a more moderate pace of 6.2% (vs. 3.6%). Additionally, the slowdown in Q4 was driven by a deceleration in fixed investment growth, which decreased to 14.7% from 29.2% in the previous quarter. Private consumption rose more rapidly (9.5% vs. 8.9%), and government spending increased strongly due to the escalation in the war in the fourth quarter (7.3% vs. -3.3%). Annual performance and key sectoral trends For the entire year of 2024, GDP grew by 1% compared to a revised 1.8% in 2023 and 6.3% in 2022. Per capita GDP slipped 0.3% in 2024 versus an OECD average growth of approximately 1.2%. The business sector contracted by 0.6%, reflecting a shift in manpower to the reserve army. While private consumption rose by 3.9%, investment in fixed assets fell sharply by 5.9%, with notable declines in residential and non-residential construction. Public consumption surged by 13.7%, largely due to increased defense expenditures due to the war. Meanwhile, exports of goods and services (excluding startups and diamonds) dropped by 4.6%, while imports fell by 2.0%. GDP trends and forecast: 2023-2...