JERUSALEM: Israel GDP grew at an annualized rate of 3.4% in the first quarter, buoyed by a temporary Gaza ceasefire that allowed businesses to rebound before fighting resumed in mid-March, official data showed Sunday.
The Central Bureau of Statistics reported the expansion in Israel GDP (gross domestic product), slightly below economists’ median forecast of 3.5%. The uptick followed a sharp contraction late last year as Israel’s war with Hamas took a heavy economic toll.
Growth was driven by an 8.7% surge in fixed investments and a 44.8% rebound in construction, though the sector remains far below pre Gaza invasion levels.
Business sector output rose 4.4%, aided by the brief pause in hostilities that allowed some reservists to return to work. Meanwhile, government and defense spending declined by 0.2% and 15.6%, respectively.
But the recovery remains fragile. The central bank projects 3.5% growth for the year, a target that could be derailed if ceasefire talks fail and Israel mobilizes more troops. A prolonged labor shortage in construction, worsened by the exclusion of Palestinian workers since October, continues to drag on the economy.
The government’s efforts to recruit foreign workers have progressed slowly, leaving the sector struggling to regain lost ground. With killings in Palestine ongoing and no lasting truce in sight, Israel’s economic outlook remains uncertain.