Israel Q2 GDP Growth Revised Lower in 2nd Estimates

Israel’s economy grew at an annualized rate of 14.9% in the second quarter of 2026, rebounding sharply from an upwardly revised 1.7% contraction in the first quarter as the impact of the war with Iran eased. The reading was slightly below the first preliminary estimate and market expectations of 15.9%. The downward revision mainly reflected weaker growth in exports of goods and services, excluding startups and diamonds, which rose 16.6% compared with 25.2% in the first estimate, as well as fixed capital formation, which weakened to 4.1% from 6.3%. Still, growth remained elevated, supported by strong gains in private consumption (15% vs 14.7%) and public consumption (22.2% vs 19.5%). The annualized growth rate for the first half of 2026 was revised higher to 3.5% from 1.5%.

Israel’s economy grew at an annualized rate of 15.4% in the second quarter of 2026, rebounding sharply from a revised 2.2% contraction in the first quarter as the impact of the war with Iran eased. The growth easily beat market expectations of 6.9%, with the Central Bureau of Statistics saying the Q2 rebound was driven by strong gains in private and public consumption and exports, following sharp declines in these areas in Q1. Exports of goods and services, excluding startups and diamonds, jumped 25.2%, while imports of goods and services, excluding defense imports, rose 22.7%. Government consumption climbed 19.5%, while private consumption advanced 14.7%. Fixed capital formation also grew 6.3%. The Bank of Israel raised its 2026 growth forecast to 4% last month and expects growth to accelerate to 5.5% in 2027.

Israel’s economy shrank at an annualized rate of 3.8% in the first quarter of 2026, following a downwardly revised 2.8% growth in the previous quarter, matching preliminary estimates. The contraction was driven largely by the "Harry’s Uproar" war, which disrupted economic activity. Domestic demand weakened, with consumer spending falling 4.9% and public consumption declining 4.8%. Net trade also weighed on GDP, as imports of goods and services, excluding defense imports, ships, aircraft, and diamonds, rose 1.8%, while exports of goods and services, excluding start-ups and diamonds, fell 32.7%. On the other hand, fixed asset investment increased by 12.8%.