Israel’s economy expanded by 3.1% in 2025, exceeding earlier forecasts, according to data published Monday by the Central Bureau of Statistics. GDP per capita rose by 1.7%, reflecting a moderate improvement in living standards after a turbulent period marked by war and global economic headwinds.
In comparison, Israel’s economy grew by just 1% in 2024.
Business Sector Leads Growth
The business sector posted a 3.4% increase in output in 2025, while investment in fixed assets climbed by a robust 8.1%, signaling renewed business confidence. Public consumption rose modestly by 1.7%.
Private consumption — often a key engine of growth — increased by 2.6% over the year, slightly above the population growth rate of 1.4%, but down from 3.9% in 2024. The slower pace reflects the economic strain on households amid rising prices.
Exports of goods and services rose 6.1% in 2025, a turnaround from a 4.7% decline in 2024. The export sector had been expected to suffer significantly from the strengthening shekel and reported boycotts in parts of the world, but the impact proved more limited than feared.
Imports of goods and services increased by 8.2%, largely due to the weakening dollar exchange rate. The figure excludes defense imports, aircraft, ships and diamonds.
Dramatic Fourth-Quarter Rebound
The final quarter of 2025 delivered several surprises. Overall GDP grew at an annualized rate of 4%, while GDP per capita increased by 2.9%. Business GDP surged by 7.1%.
The standout figure was exports, which jumped by 25.6% in the fourth quarter — a sharp rebound attributed in part to the end of the war in mid-October. At the same time, imports fell by 3.9% in the quarter (excluding defense imports and certain high-value items).
However, not all indicators were positive. Private consumption fell by 3.6% in the fourth quarter, likely reflecting the continued erosion of household purchasing power. Investment in fixed assets declined by 6.4% compared to the third quarter, and public consumption rose by just 1.7%.
Some moderation in public spending is also expected in early 2026 due to the continuation budget, which limits new expenditures beyond last year’s levels.
Living Standards and Fiscal Picture
With GDP growth of 3.1% and slower population growth of 1.4% in 2025 — compared with an average of about 2% in previous years — per capita output rose, indicating a certain improvement in living standards.
According to forecasts by the Organisation for Economic Co-operation and Development (OECD), GDP per capita across member states is expected to rise by 1.3% in 2025, placing Israel slightly above the projected average.
The CBS also reported that the government sector recorded a current account deficit of 110 billion shekels in 2025, narrowing from a deficit of 161.2 billion shekels in 2024.
While the data point to resilience and recovery following a difficult year, economists caution that global uncertainty, exchange rate volatility and domestic fiscal constraints will continue to shape Israel’s economic trajectory in 2026.
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