Post-ceasefire economic update: recovery, risk, and resilience

ISRAEL - In Brief 24 Jun 2025 by Sani Ziv

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After twelve days of fighting, during which the United States joined the attack on Iran’s nuclear facilities, a ceasefire came into effect that is likely to end the war. The war concluded with significant damage to Iran’s nuclear infrastructure and missile systems, without deteriorating into a broad regional conflict. From Israel’s perspective, this represents a substantial improvement in its geopolitical situation and a reduction in long-term strategic risk, a trend reflected in the positive response of the financial markets since the outbreak of war.Growth implications Thanks to the rapid end of the war, the economic impact on output will be relatively limited, with estimated losses of around NIS 6 billion during the period of the war, mainly due to worker absences. As a result, GDP data for the second quarter of 2025 is expected to reflect a modest slowdown in growth. However, assuming the ceasefire holds, economic activity will resume and we anticipate accelerated growth in the third quarter. We updated our macroeconomic model accordingly, and our current assessment is that GDP will expand at a rate of at least 3% in 2025. Fiscal implications We now estimate total additional military expenditures due to the war to total around NIS 25 billion, down from previous estimates of NIS 40-60 billion. In addition, we estimate up to NIS 10 billion in related civilian costs, including compensation for property damage, evacuation support, and furlough (unpaid leave) benefits. These costs are above the regular budget and imply an increase of nearly 2 percentage points of GDP in the 2025 fiscal deficit, though some of the burden may still be covered through internal budget reall...