By Steven Scheer
JERUSALEM (Reuters) -Israel’s economy rebounded sharply in the third quarter, putting in a stronger-than-expected performance after a weak second quarter that was hit by the conflict with Iran on top of the Gaza war.
Gross domestic product grew an annualised 12.4% in the July-to-September period from the prior three months, the Central Bureau of Statistics said on Sunday.
“This reflects a rapid recovery following the war with Iran,” said Leader Capital Markets Chief Economist Jonathan Katz, referring to a 12-day war between Israel and Iran in June that shut down Israel’s economy due to heavy incoming missile fire.
The third-quarter GDP gain topped a Reuters consensus of an 8% expansion and was fuelled by broad-based gains led by consumer spending (+23.0%), exports (+23.3%) and investment (+36.9%). Government spending grew 4.4%.
The Gaza war was triggered by a raid on Israel by Palestinian militant group Hamas on Oct. 7, 2023. Since then, the economy has been restrained due to as many as 300,000 civilians called into military reserve duty and forgoing their jobs for long stretches of the conflict.
Economic growth was 1% in 2023 and is projected to grow 2.5% in 2024, according to the Bank of Israel, whose estimate is slightly weaker than 2.8% from the Finance Ministry. But growth, held back somewhat during the two-year Gaza war, is forecast to expand around 5% in 2026.
Israel’s economic resilience has helped lead to all-time highs in Tel Aviv share indices, while the shekel has gained some 11% versus the dollar this year to a 3-1/2-year peak.
GDP in the second quarter was revised to a 4.3% contraction from a prior 3.9%.
Last month, the U.S. brokered a ceasefire between Israel and Hamas that is still largely holding.
The GDP data come after the bureau on Friday said the annual inflation rate held steady at 2.5% in October, a level some believe could prompt the Bank of Israel to lower short-term interest rates, possibly as soon as next week.
“The rapid growth in the third quarter supports a cautious monetary approach by the Bank of Israel,” said Katz, who expects a rate cut “every second decision starting from 24 November” to reach 3.75% from a current 4.5%.
(Reporting by Steven Scheer; Editing by Andrew Heavens)
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