Israel Economy Shrinks 3.3% in Q1

2026-05-17 23:41 By Chusnul Chotimah 1 min. read

Israel's economy contracted at an annualized rate of 3.3% in the first quarter of 2026, reversing a downwardly revised 2.9% growth in the fourth quarter of 2025.

It was the first contraction in the economy since the second quarter of 2025, due to the impact of the war with Iran.

Consumer spending dropped 4.7%, government spending fell 4.8%, and exports declined 3.7%.

By contrast, fixed investment grew 12.6%.

The Bank of Israel currently expects the economy to grow by 3.8% this year, depending on whether the ceasefire reached last month with Iran holds.

Last year, the country’s economy grew 2.9% in 2025 and was expected to rebound in 2026 to more than 5% growth following a ceasefire in October that ended major fighting in the two-year Gaza war.



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