By Steven Scheer<\/p>\n
JERUSALEM, May 17 (Reuters) – Israel’s economy began 2026 with a slowdown, hit by war with Iran, but growth is expected to recover as long as the \u200cconflict does not reignite.<\/p>\n
Gross domestic product contracted at an annualised rate of 3.3% in the \u200cfirst three months of 2026, the Central Bureau of Statistics said on Sunday, less severe than a 4% drop forecast \u200bin a Reuters poll of economists.<\/p>\n
Israel’s economy grew 2.9% in 2025 and was expected to bounce back in 2026 to more than 5% growth after a ceasefire in October ended major fighting in the two-year Gaza war.<\/p>\n
But growth took a hit after the U.S. and Israel launched strikes against Iran on February \u200c28, resulting in weeks of ballistic \u2060missile fire from Iran that closed schools and dampened business activity along with consumer spending.<\/p>\n
“The Israeli economy began the year with strong momentum, with rapid growth \u2060in the first two months,” said Ofer Klein, head of economics and research at Harel Insurance and Finance.<\/p>\n
“The lifting of most restrictions in April and the improvement in economic activity since then … indicate a relatively quick \u200breturn to \u200bpositive growth in the current quarter,” said Klein, who \u200braised his growth estimate for this \u200cyear to 3.5% from 3.2%.<\/p>\n
The Bank of Israel sees 3.8% growth this year, down from a 5.2% estimate before the Iran war, depending on whether a ceasefire with Iran holds.<\/p>\n
Jonathan Katz, chief economist at Leader Capital Markets, said he expected 4% growth.<\/p>\n
“This is a modest GDP contraction compared to the second quarter of 2025 – the last Iran confrontation in June of 2025 – when GDP contracted by over \u200c10%,” he said, adding that industrial exports bounced back in \u200bApril.<\/p>\n
The statistics bureau reported on Friday that the annual inflation \u200brate held steady at 1.9% in April. \u200bSome economists believe interest rate reductions could resume as early as May \u200c25, the Bank of Israel’s next rate decision \u200bmeeting.<\/p>\n
Israeli financial markets do \u200bnot trade on Sunday. The shekel has appreciated 20% in the past year to 2.91 per dollar, a 33-year high. Tel Aviv share indices are close to all-time highs reached earlier \u200bin May.<\/p>\n
In the first quarter, \u200cconsumer spending fell 4.7%, exports declined 3.7% and government spending shed 4.8%. Investment in fixed \u200bassets rose 12.6%.<\/p>\n
On a per capita basis, the economy shrank 4.5% in the quarter.<\/p>\n
(Reporting \u200bby Steven ScheerEditing by Peter Graff, Aidan Lewis)<\/p>\n","protected":false},"excerpt":{"rendered":"By Steven Scheer JERUSALEM, May 17 (Reuters) – Israel’s economy began 2026 with a slowdown, hit by war…\n","protected":false},"author":3,"featured_media":803463,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[310463,64,206252,79,83,6087,99,327091,327092,67,132,68],"class_list":{"0":"post-803462","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bank-of-israel","9":"tag-business","10":"tag-central-bureau-of-statistics","11":"tag-economy","12":"tag-iran","13":"tag-iran-war","14":"tag-israel","15":"tag-israel39s-economy","16":"tag-positive-growth","17":"tag-united-states","18":"tag-unitedstates","19":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116591520995002521","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/803462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=803462"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/803462\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/803463"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=803462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=803462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=803462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}