Israel’s economy is expected to recover at a slower pace than previous downturns, despite an economic bounce-back in the first quarter, according to S&P Global. The Israeli economy showed signs of improvement in the first quarter after facing a decline late last year due to the conflict with Hamas in Gaza. Gross domestic product (GDP) saw an annualised growth of 14.1% in the first quarter, following a significant 21.7% contraction in the previous quarter.
However, S&P did not make any changes in ratings but maintained its growth estimate of 0.5% for 2024, with expectations of acceleration to 5.0% in 2025. The agency noted that the recovery from the recent conflict would likely be slower compared to Israel’s rebound from COVID or past military conflicts. Israeli policymakers are confident in the economy’s resilience and anticipate a quicker bounce-back, with the central bank forecasting a growth of around 2% in 2024.
S&P highlighted that there are still challenges in sectors such as tourism, construction, and agriculture, along with ongoing regional security and domestic political uncertainties that could hinder a faster recovery this year. The ratings agency also mentioned that risks to Israel’s credit profile remain high, citing the possibility of escalation in the conflict with Iran or Hezbollah in Lebanon. Last month, S&P downgraded Israel’s long-term ratings from AA-minus to A-plus, citing geopolitical risks and projecting a budget deficit of 8% of GDP in 2024. This downgrade followed a similar rating cut by Moody’s in February.
