Volatile Economy: Israel's Q2 Growth Falls Short Amid Gaza Conflict

Israel's economy grew by an annualized 1.2% in Q2 2024, below forecasts. The economic instability, influenced by ongoing Gaza conflict, comes with rising inflation and unlikely prospects for an interest rate cut by the Bank of Israel. Key growth areas included consumer and government spending.

Israel's economy posted weaker-than-expected growth in the second quarter of 2024, continuing a trend of economic volatility since the onset of the conflict in Gaza, yet the slowdown is unlikely to prompt a central bank rate cut amidst rising inflation pressures.

According to preliminary data from the Central Bureau of Statistics on Sunday, GDP grew an annualized 1.2% in the April-June period, falling short of Reuters' projected 4.4%. Per capita, GDP decreased by 0.4%.

Overall growth was driven by consumer spending (12%), investment in fixed assets (1.1%), and government spending (8.2%), partially offset by an 8.3% drop in exports. Inflation rate spiked to 3.2% in July from 2.9% in June, exceeding the government's target, influencing the Bank of Israel's decision on rate changes.

(With inputs from agencies.)