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Israel's Economy Shrinks Unexpectedly Well Below Growth Forecasts

Taarek Refaat Israel's economy contracted sharply in the second quarter of 2025, as the 12-day war with Iran triggered a nationwide disruption of commercial activity and dragged down consumer spending and investment. According to data released Sunday by the Israeli Central Bureau of Statistics, gross domestic product (GDP) shrank by 3.5% on an annualized basis, seasonally adjusted, a stark contrast to the 0.2% median growth estimate predicted by a Bloomberg survey of six economists. The economic decline came on the heels of a surprise Israeli offensive launched on June 13 targeting Iran's nuclear infrastructure and military installations. Israel labeled Iran's nuclear program a "strategic existential threat." In retaliation, Iran launched multiple ballistic missile attacks, prompting mass sheltering across Israeli cities and a near-complete shutdown of economic activity. The war's economic toll was felt most acutely in private consumption, which plunged 4.1%, and Gross fixed capital formation, which plummeted 12.3%, as reported by the statistics bureau. The war also introduced fresh uncertainty into regional stability, rattling investor sentiment and delaying major infrastructure and housing projects. The Bank of Israel still projects 3.3% GDP growth for 2025, but the Finance Ministry last week revised its outlook downward to 3.1%, citing the war's impact and growing fiscal pressures. Achieving even these revised figures will now depend on a strong economic rebound in the second half of the year, a challenging feat amid ongoing military escalations. Further compounding economic uncertainty is Israel's announced preparation for a large-scale ground operation in Gaza, with the stated aim of "eliminating Hamas presence." Military analysts estimate the move could displace over one million Palestinians and require the mobilization of tens of thousands of reservists, placing additional strain on public spending and labor market productivity. With defense spending surging and domestic consumption slowing, Israel faces a delicate balancing act: restoring economic momentum while navigating escalating regional conflict. read more CBE: Deposits in Local Currency Hit EGP 5.25 Trillion Morocco Plans to Spend $1 Billion to Mitigate Drought Effect Gov't Approves Final Version of State Ownership Policy Document Egypt's Economy Expected to Grow 5% by the end of 2022/23- Minister Qatar Agrees to Supply Germany with LNG for 15 Years Business Oil Prices Descend amid Anticipation of Additional US Strategic Petroleum Reserves Business Suez Canal Records $704 Million, Historically Highest Monthly Revenue Business Egypt's Stock Exchange Earns EGP 4.9 Billion on Tuesday Business Wheat delivery season commences on April 15 Videos & Features Story behind Trending Jessica Radcliffe Death Video News Israeli-Linked Hadassah Clinic in Moscow Treats Wounded Iranian IRGC Fighters Arts & Culture "Jurassic World Rebirth" Gets Streaming Date News China Launches Largest Ever Aircraft Carrier News Ayat Khaddoura's Final Video Captures Bombardment of Beit Lahia Business Egyptian Pound Undervalued by 30%, Says Goldman Sachs Videos & Features Tragedy Overshadows MC Alger Championship Celebration: One Fan Dead, 11 Injured After Stadium Fall Arts & Culture South Korean Actress Kang Seo-ha Dies at 31 after Cancer Battle Lifestyle Get to Know 2025 Eid Al Adha Prayer Times in Egypt News The Jessica Radcliffe Orca Attack? 100% Fake and AI-Generated