Israel’s economy posted a significant rebound in the third quarter of 2024, with GDP growing at an annualized rate of 3.8%, according to the Central Bureau of Statistics (CBS). On a quarterly basis, GDP expanded by 0.9% compared to the previous quarter, marking a notable improvement from the sluggish performance earlier in the year.

This growth comes as a welcome development following the second quarter’s meager annualized growth rate of 1.2% (0.3% quarterly growth), which had raised concerns about negative per capita growth. The latest data points to a reversal in the economic trend, driven by robust private consumption and business output.

Business output soared by 5.4%, reflecting increased activity across multiple sectors, while private consumption surged by 8.6% on an annual basis. These two components were instrumental in driving the overall GDP growth.

GDP per capita, a critical indicator for measuring individual economic well-being, grew by 2.6% annualized in Q3. This is particularly significant given that Israel narrowly avoided two consecutive quarters of negative per capita growth, which would have indicated a technical recession.

In contrast to the buoyant private sector, government spending dropped sharply by 10% compared to mid-year levels. This decline underscores a shift in fiscal policy, with reduced public expenditure contributing to a more subdued role for government in driving economic growth.

Investments in fixed assets rose by an impressive 21.8%, with residential construction leading the way. The sector saw a 30% increase in activity compared to the previous quarter, though levels remain below those recorded during the same period last year.

Exports of goods and services grew by 5.2%, driven by a 6.6% rise in service exports and a 3.7% increase in non-tourism-related services. However, the most striking trade figure was a 26.7% jump in imports, excluding defence-related goods. Overall, the total import of goods and services climbed by 9.8%, recovering from a sharp decline of 8.3% in Q2.

The latest figures provide a cautiously optimistic view of Israel’s economic trajectory. While the growth in private consumption and investments demonstrates resilience, the sharp decline in government spending and the rapid increase in imports highlight potential areas of vulnerability.

Looking ahead, sustaining this momentum will depend on a balance between domestic drivers and external factors, including geopolitical stability and global economic trends.

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