Israel economy shows strong growth driven by tech sector

Israel’s economy has shown significant resilience and growth despite ongoing regional conflicts. Following a 1% expansion in 2024, GDP grew by 2.9% in 2025 and 3.2% in the first half of 2026. The Bank of Israel projects further growth of 4% in 2026 and 5.5% in 2027.

This economic rebound is largely driven by a booming technology sector, which accounts for approximately one-fifth of the country's economic activity. High global demand for artificial intelligence and cybersecurity has attracted record levels of foreign direct investment. In 2025, foreign investment rose by 78% to $26.2 billion, bolstered by acquisitions such as Alphabet and Palo Alto Networks purchasing Israeli firms Wiz and CyberArk. In the first three months of 2026, foreign investment reached a record $14.1 billion.

Financial markets have also performed strongly; the Tel Aviv Stock Exchange's TA-125 index has risen over 110% in the last three years, and the Israeli shekel reached a 30-year high against the US dollar in May. While unemployment remains low at 2.8% and inflation is at 1.5%, the public remains concerned about the rising cost of living and food prices. Additionally, the ongoing military operations have imposed a significant financial burden, with costs exceeding $114 billion.