Israel’s economy shrank by an annualized 3.8% in the first quarter of 2026, compared with the fourth quarter of 2025, according to the second assessment by the Central Bureau of Statistics. This is a sharper contraction that the 3.3% found in the initial assessment. The economy was hit hard in the first quarter by the war with Iran.

On a per capita basis, including population growth, GDP is now 5% lower (annualized) than in the last quarter of 2025. Private consumption spending also fell by 5%, and business output fell by 3.8%. However, compared with the corresponding quarter of 2025, there is a 1.5% increase in GDP, and a 1.9% increase in business output.

The gap between the two assessments is mainly reflected in business output, which fell 3.3% in the first assessment, and 3.8% in the second estimate. An even more significant gap is seen in export data: in the first assessment, there was a 5.6% increase in exports of goods and services. However, in the second estimate, this increase shrank to only 1.9%. The GDP data was by the latest campaign against Iran, which began on February 28. The preceding quarter saw significant growth. Compared with the corresponding quarter of 2025, an increase can be seen in all indicators, except for a slight decrease in public spending due to the costs of the war, which have fallen slightly since.

Published by Globes, Israel business news - en.globes.co.il - on June 16, 2026.

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