In 2023, Israel’s economy experienced a slow growth of just 2%, with zero per capita growth. The last quarter saw a significant decrease in GDP due to the consequences of war, population evacuations in the north and south, business closures, and reduced work volumes in many sectors.
Inflation rates started at 5.4% but decreased to 3% by the end of the year, primarily due to the government’s restrictive monetary policies. The Bank of Israel continued to raise interest rates throughout the year, reaching 4.75% by the first half of 2023.
The increase in interest rates led to reduced consumption and higher private savings, impacting lending to small businesses and consumers. The real estate market experienced a decline with falling apartment prices.
Two major events had a significant impact on Israel’s economic growth over the past year: the government’s push for judicial reform and Black Saturday and War of Iron Swords. These events affected various sectors such as construction and defense production.
Following the outbreak of war, Palestinian workers ceased working across various sectors, affecting industries like construction. The government allocated significant funds for military needs, reaching 100 billion shekels, to address the war’s demands.
Prime Minister Benjamin Netanyahu emphasized the positive signs of economic recovery, especially in wages and employment following the war. He highlighted the need for prudent fiscal adjustments to manage additional war-related costs and prevent an increase in government debt-to-GDP ratio.
Netanyahu underscored the importance of economic strength for independence and decision-making amid external pressures. He emphasized that Israel should be self-sufficient in defense production to ensure autonomy and resilience.
Overall, Israel’s economy showed signs of recovery after a challenging year marked by war-related events that negatively affected various sectors such as construction and real estate markets.
