War backdrop, thriving economy

After three years of multi-front war in the Middle East, Israel's economy is flourishing by most measures, defying expectations of economic collapse.

Growth outpaces major economies

Israel's GDP grew two point nine percent in two thousand twenty-five and three point two percent in the first half of two thousand twenty-six.

Bank of Israel forecasts stronger growth

The Bank of Israel has forecast four percent growth for the whole of two thousand twenty-six and five point five percent growth in two thousand twenty-seven.

Currency and markets surge

Over the past three years, the shekel has strengthened against the US dollar, hitting a three-decade high in May, and the benchmark TA-125 stock index is up more than one hundred ten percent.

Low unemployment, modest inflation

Unemployment stands at two point eight percent, while inflation is modest at one point five percent, supporting household purchasing power.

Tech sector drives resilience

A booming tech sector largely insulated from conflicts has driven Israel's economic resilience, attracting record foreign investment amid the global AI rollout.

Record foreign investment in tech

Total direct foreign investment hit a record twenty-six point two billion dollars last year, up seventy-eight percent from two thousand twenty-four, led by US tech giants.

War costs strain public finances

In March, the Bank of Israel estimated Israel's war costs to date had reached approximately three hundred fifty billion shekels, or one hundred fourteen point six billion dollars.

Defence budget to nearly triple

Netanyahu has pushed to raise the annual defence budget to one hundred eighty-three billion shekels, or sixty billion dollars, equivalent to roughly nine percent of GDP.

Voters prioritise cost of living

In an opinion poll released by the Israel Democracy Institute last month, thirty-eight percent of Jewish Israelis chose the economy and cost of living as most important election issue.

Food prices rising faster than inflation

Though overall inflation is modest, food prices have risen eight percent between the start of two thousand twenty-four and mid-two thousand twenty-six, according to Lobby ninety-nine.

Growth lags pre-conflict trend

The Bank of Israel estimated an accumulated loss of output through the end of two thousand twenty-five equivalent to eight point six percent of annual GDP since late two thousand twenty-three.

Future hinges on security situation

Economists say Israel's economic prospects will in large part hinge on whether conflict in the region escalates or subsides in the coming years.

“If we are able to put an end to the war and reduce military spending, the future could be bright.”