Israel’s economy faced a significant contraction in the fourth quarter of 2023, with the gross domestic product shrinking by an annualized rate of 19.4%. This dramatic decline was largely attributed to the effects of the Hamas attacks on October 7th followed by the ensuing war in Gaza.
Impact on Key Economic Indicators
During this period, private consumption saw a substantial decline of 27%, reflecting weakened demand and consumer confidence due to the ongoing conflict. Additionally, exports fell by 18% and imports experienced a sharp decline of 42%.
Expert Analysis
Economists, such as Liam Peach from Capital Economics, have noted that the economic downturn was more severe than anticipated. The aftermath of the attacks and war significantly impacted Israel’s economy, leading to the largest quarterly decline since the second quarter of 2020 during the height of the COVID-19 pandemic.
Recovery Outlook
While there are signs of a potential recovery in the first quarter of the following year, experts predict that overall GDP growth in 2024 may be one of Israel’s weakest rates on record. The central bank has already lowered its growth outlook for 2024 to 2%, down from 2.8%, reflecting the lingering impact of the conflict.
Despite these challenges, Israel’s GDP managed to grow by 2% in 2023 as a whole, according to the statistics agency. However, the road to full economic recovery remains uncertain as the country navigates through the aftermath of the war.
