Photo Credit: Olivier Fitoussi/Flash90
The Central Bureau of Statistics offices in Jerusalem, Dec. 1, 2019.

Israel’s Gross Domestic Product contracted by 19.4% in the fourth quarter of 2023 on an annualized basis, according to preliminary data compiled by the Central Bureau of Statistics.

It is the steepest decline since Q2 2020, when the economy shrank by nearly 30% due to the coronavirus pandemic and resulting lockdowns.


The Q4 2023 slowdown compared to an expansion of 2.7% in the previous quarter. Overall, the economy expanded by 2% in 2023 after growing 6.5% in 2022.

Despite the war against Hamas, the Bank of Israel expects the economy to grow by 2% in 2024.

During a meeting with then-Israeli Foreign Minister Eli Cohen in December, Mathias Cormann, secretary-general for the Organisation for Economic Co-operation and Development, said he expected Israel’s economy to grow by 4.5% in 2025.

Cormann’s statement demonstrated the OECD’s faith in Israel’s economy in the longer term, even after the organization lowered Israel’s growth forecast from 2.9% to 2.3% in 2023 and predicted a still sharper reduction of 1.5% for 2024 (compared to 3.3%) due to the Oct. 7 attack.

Earlier this month, Israeli Finance Minister Bezalel Smotrich sharply criticized Moody’s Investors Service after the agency downgraded Israel’s credit rating for the first time, to A2.

Smotrich called the agency’s announcement “a political manifesto.”

Israel’s economy, said Smotrich, “is strong by all measures: In its ability to support the entire war effort, on the front and in the rear, until victory will be achieved with the help of God and the valor of the fighters, and to return to a path of accelerated growth.”

Moody’s rating scale ranges from D to AAA. A2 is still strong—the agency’s sixth-highest investment grade. (Bloomberg notes it puts Israel on par with Poland and Chile). However, Moody’s also said Israel’s outlook was negative.

“[T]he ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future,” the credit ratings agency said.

Smotrich said that Moody’s analysis didn’t include serious economic arguments and was based on a pessimistic geopolitical worldview, reflecting a lack of confidence in Israel’s security apparatus and national resilience, as well as in the righteousness of its war against its enemies.

“Moody’s is not even able to define Hamas and Hezbollah as terrorist organizations in its announcement, and implies that it would have avoided the downgrade if only Israel had accepted the suicide plan offered to it by elements in the international community to stop the war and establish an Arab terrorist state in Gaza and Judea and Samaria,” he said.


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