Israel’s economy shrank at an annualized rate of 3.5% in the second quarter, according to initial estimates by the Central Bureau of Statistics. In quarterly terms, this is a decrease of 0.9%. Gross domestic product (GDP) per capita fell by 4.4% in annual terms and business GDP fell by 6.2%.
All components of GDP fell in the second quarter. Private consumption fell 4.1%, public consumption fell 1%, fixed asset investments fell 12.3%, and exports (excluding startups and diamonds) fell 3.5%. Imports, on the other hand, rose 3.1%.
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The Central Bureau of Statistics notes that the data “were significantly affected by the Iran operation, especially private consumer spending and investment in fixed assets,” which fell 4.1% and 12.3% respectively.
These figures are in line with the assessment of the Ministry of Finance chief economist a few days ago, forecasting a hit to the economy in the second quarter of 2025, due to the shutdown of the economy for about two weeks in June during the Iran operation.
The chief economist sees partial compensation in the third quarter, “based on past experience.” Indeed, in July and August there has already been a certain indication of recovery in some of the data, with Bank Hapoalim chief financial markets strategist Modi Shafrir saying that consumer credit card purchases rose 13.4% in July and August compared with the corresponding period last year and by 3.7% in the last week alone.
As a result of the latest war scenario, the Ministry of Finance recently revised the growth forecast for 2025 downward by 0.5% from 3.6% to 3.1%.
Published by Globes, Israel business news – en.globes.co.il – on August 17, 2025.
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