Israel’s economic growth in Q1 surges by 14.1%, driven by increased consumer spending and construction activity

Israel’s economy experienced a significant rebound in the first quarter of 2024, with a 14.1% annualized growth in GDP, according to the Central Bureau of Statistics. This recovery was driven by a resurgence in private spending and investment, both of which had declined in the previous quarter due to the conflict in Gaza.

The war in Gaza, which began with Hamas’ cross-border attack on southern Israel, had led to a 21.7% contraction in GDP in the fourth quarter of 2023. However, the latest data indicates a strong comeback for the Israeli economy in the first three months of this year.

Private consumption, which accounts for more than half of Israel’s economic activity, saw a significant increase of 26.3% in the first quarter. This surge followed a decline in the previous quarter when consumer sentiment was low. Investment in fixed assets also saw a substantial growth of 49.2%, driven by a 290% increase in residential building projects.

Despite the positive economic indicators, the Central Bureau of Statistics noted that private consumption and investment levels have not yet fully recovered to pre-war levels. The ongoing security situation continues to impact these sectors.

In addition to the economic rebound, Israel also saw a rise in annual inflation to 2.8% in April, slightly above expectations. The combination of economic growth and inflation could delay potential rate cuts by the Bank of Israel, which is closely monitoring the situation and will make a decision on interest rates later this month.