GDP Rebounds Strongly in Q1 2024, But Recovery Remains Partial

By Aryeh Stern

According to the Central Bureau of Statistics’ preliminary data, released Thursday, Israel’s gross domestic product (GDP) surged by an annualized 14.1% in the first quarter of 2024, or by 3.3% within the quarter itself. This follows a drastic 21.7% decline on an annual basis in the fourth quarter of 2023, coinciding with the outbreak of the ongoing war. While the rebound was anticipated, its vigor surpassed most analysts’ projections, which hovered around 12%.

However, despite this significant growth, the recovery from the crisis triggered by the war remains incomplete. GDP in the first quarter of 2024 was still 1.4% lower than in the same period of 2023, with GDP per capita experiencing a 3.1% decline between these two quarters. Private sector GDP, excluding housing services and the public sector, remained 4.1% below the figure for the first quarter of 2023.

Indicators for consumption and investment underscore the lingering impact of the conflict. Although private consumption rebounded by 26.3% after a steep decline in the previous quarter, it remained subdued compared to pre-war levels, resembling those of 2021. Investment in fixed assets surged by 49.2%, yet it remains sluggish and trails behind levels observed in the two and a half years preceding the war.

On the other hand, public consumption witnessed a moderate increase of 7.1% following an unprecedented 86% surge in the previous quarter, primarily due to defense expenditures.

Import and export figures present a mixed outlook. Imports of goods and services soared by 32.7% in the first quarter of the year, while exports contracted by 11%, continuing the decline seen in the previous quarter.

Initial forecasts from January, notably the Bank of Israel’s most optimistic scenario, projected 2% GDP growth for 2024, considering the natural increase in the population, which effectively indicates negative growth. However, recent estimates paint a bleaker picture. Last month, the International Monetary Fund revised its growth forecast for Israel down to 1.6% for the year, down from its previous estimate of 3.1%. Similarly, credit rating agency S&P, which downgraded Israel’s rating recently, anticipates a mere 0.5% growth in 2024.

The January-March statistics, while reflecting relatively high growth, primarily indicate a recovery from the initial downturn at the war’s onset. The 1.4% decline in GDP compared to the previous year underscores the ongoing challenges.