- Israeli stocks, represented by the BlueStar® Israel Global Index (BIGI®), declined by 3.38% in Q1 2024, partially retracing gains made in the second half of 2024.
- Inflation increased slightly to 3.2%, above the previous year and global averages. The Bank of Israel maintained interest rate at 4.5% in Q1 2025, citing the ongoing war and the resulting supply constraints. The BOI noted that “the decision to keep the interest rate unchanged stood out against downward interest rate trends in other advanced economies [throughout] 2024.”
- The Bank of Israel Research Department forecasts that GDP is expected to grow by 4% in 2025, which was revised upward from it’s prior (October 2024) forecast. The Department now expects GDP to grow by 4.5% in 2026.
- Adjustments in fiscal measures and increased defense spending recommended by the Nagel Committee has led the BOI to target the spending deficit at 4.4% of GDP.
- Persistent labor shortages, notably in construction, drove nominal wage increases and elevated unit labor costs. This highlights long-term economic challenges, including the need for higher labor productivity and greater integration of underrepresented groups into the workforce.
- At the close of 2024, the economy's risk premium declined significantly, mirroring movements observed in the exchange rate, yet it remained elevated compared to pre-war levels. This reduction in the risk premium was also evident in lower yields on government shekel bonds.
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