The economy

Israel's real GDP grew by 2.9% in 2025, following 1.0% in 2024. The Bank of Israel's July 2026 forecast projects growth of 4.0% in 2026 and 5.5% in 2027, assuming reduced fighting in Lebanon and no renewed fighting with Iran. These are forecasts; the bank expects output to remain below its prewar trend through 2027 because labor supply remains constrained.

Established in 1954, Israel's central bank conducts monetary policy, manages foreign-exchange reserves and supervises banks. Amir Yaron became governor in December 2018 and began a second five-year term in December 2023. On September 1, 2026, its Monetary Committee lowered the policy rate to 3.25%. The bank's inflation target is 1–3% a year.

The new shekel entered circulation on September 4, 1985: one new shekel replaced 1,000 old shekels and is divided into 100 agorot. The exchange-rate band was formally abolished on June 9, 2005. The currency floats, although the Bank of Israel can intervene in the foreign-exchange market; a floating rate does not mean a promise never to intervene.

The Bank of Israel's 2025 annual report puts public debt at 68.5% of GDP at year-end, slightly higher than in 2024 and above its prewar level. The central-government deficit fell from 6.8% of GDP in 2024 to 4.7% in 2025. A smaller annual deficit can still add to the accumulated debt. The bank's July 2026 forecast projects a debt ratio of about 69% in 2026–2027, subject to defense spending and other assumptions.

In the cited 2026 rating decisions, Moody's affirmed Baa1 with a stable outlook on January 30, Fitch affirmed A with a negative outlook on March 27, and S&P affirmed A/A-1 with a stable outlook on May 8. All three long-term sovereign ratings remain investment grade. The agencies assess the government's ability to repay debt; their reports weigh economic and external-financing strengths against security risks and fiscal pressures.

The Citizens of Israel Fund began operating in June 2022 under a 2014 law. It invests levies on profits from natural resources abroad, in foreign currency, for current and future generations. Its 2025 annual report records assets of $2.790 billion at year-end and a nominal dollar return of 18.4%. That year's deposits were about $351 million, and about $52 million was allocated to the state budget.

The Consumer Price Index fell 0.5% in September 2026, while prices were 1.6% higher than a year earlier, according to the October 15 release. Annual inflation was within the Bank of Israel's 1–3% target range. A monthly decline does not erase earlier price increases. The CPI measures changes in a household consumption basket, while the separately published home-price index tracks property prices.

Israel's foreign-exchange reserves were $236.998 billion at the end of September 2026, equivalent to 34.2% of GDP, according to the Bank of Israel's October 7 release. The monthly decrease mainly reflected changes in asset and currency valuations. The reserves provide foreign currency in emergencies and enable intervention when foreign-exchange markets are disrupted. They are managed separately from the Citizens of Israel Fund.

Wiz was founded in 2020 by Assaf Rappaport, Ami Luttwak, Yinon Costica and Roy Reznik, who had previously built Adallom and worked at Microsoft. Its software identifies risks in cloud environments. Google announced a $32 billion cash purchase in March 2025 and completed the acquisition on March 11, 2026. Wiz joined Google Cloud, retaining its brand and support for other cloud providers.

Founded in 1999, Jerusalem-based Mobileye develops driver-assistance and autonomous-driving technology, including EyeQ chips and software. Intel acquired it in 2017; Mobileye returned to the stock market in 2022, with Intel retaining majority ownership. On July 23, 2026, Mobileye announced that founder Amnon Shashua intended to leave the CEO role when a successor was appointed. The same announcement reported more than 250 million vehicles built with EyeQ technology.

Gil Shwed, Marius Nacht and Shlomo Kramer founded Check Point in 1993; it listed on Nasdaq in 1996. The company sells security for networks, cloud systems and workplaces. Nadav Zafrir became CEO in December 2024, while Shwed became executive chairman. For the quarter ending June 30, 2026, Check Point reported revenue of $673.6 million, including $332.6 million from security subscriptions.

Nvidia expanded its Israeli engineering operations through the $7 billion acquisition of Mellanox, completed in April 2020. Mellanox brought data-center networking technology, including InfiniBand and Ethernet. In December 2025, Nvidia announced a campus in Kiryat Tivon with capacity for 10,000 employees; its announced timetable envisaged construction in 2027 and initial occupancy in 2031.

Intel opened its first development center outside the United States in Haifa in 1974. Its Israeli activities include development in Haifa, Petah Tikva and Jerusalem and chip manufacturing in Kiryat Gat. The factory expansion announced in 2023 is separate from the existing plant: in July 2026, Intel said the expansion remained under review to align with customer demand. The Finance Ministry canceled a NIS 1.3 billion grant installment for unperformed 2025 work, while leaving a later installment in place.

monday.com was founded in 2012 by Roy Mann and Eran Zinman and listed on Nasdaq in June 2021. Its software covers work management, customer relationships, development and service operations. For the quarter ended June 30, 2026, it reported revenue of $364.6 million, up 22% from a year earlier, and a $1.5 million operating loss under GAAP. Its August results also described an organizational restructuring and a shift toward an AI work platform.

Founded in 2010 and headquartered in Herzliya, Playtika develops mobile games including Slotomania, Bingo Blitz and June’s Journey. It acquired Wooga in 2018 and listed on Nasdaq in 2021. Slotomania uses virtual casino gameplay without cash prizes. For the quarter ended June 30, 2026, Playtika reported $731.1 million in revenue and $48 million in net income; revenue increased 5% from a year earlier.

The Israel Innovation Authority succeeded the Office of the Chief Scientist as an independent authority in 2016. It supports industrial research, startups, incubators and international development partnerships. Its Startup Fund combines public support with private investment. Changes effective July 15, 2026 raised maximum support for approved deep-tech companies to NIS 2 million at pre-seed and NIS 6 million at seed stage, subject to the program’s conditions.

The Innovation Authority’s May 2026 report puts Israeli technology companies’ 2025 fundraising at $14.6 billion, up about 30%, while the number of rounds fell and capital became more concentrated in large deals. Investors headquartered outside Israel supplied 70% of venture investment. Israeli venture funds separately raised $2.4 billion from their own investors. Company funding, fund fundraising and acquisition proceeds measure different flows and should not be added together.

Israeli-founded cybersecurity businesses cover network protection, cloud security, identity and connected-device risk. Check Point remains an independent public company. Several other businesses changed ownership in 2026: Palo Alto Networks completed its CyberArk acquisition on February 11, Google completed its Wiz acquisition on March 11, and ServiceNow completed its Armis acquisition on April 20.

Multinational companies operate Israeli development centers in software, chips and communications; Intel and Nvidia are examples. The Innovation Authority’s 2026 report counted 511 multinational companies that had begun operating in Israel since 2000, including 35 additions in 2025. This is a company count, not a count of laboratories or employees. The same report noted falling domestic R&D employment in 2025 and expansion abroad by Israeli companies, so hiring trends were not uniformly positive.

University technology-transfer offices protect research inventions and license them to companies or help establish startups. Examples include Yeda at the Weizmann Institute, Yissum at the Hebrew University, Ramot at Tel Aviv University and T3 at the Technion. Yeda licensed the Weizmann-developed multiple-sclerosis drug Copaxone to Teva; Yissum was established in 1964.

The Defense Ministry reported $19.2 billion in defense export contracts signed during 2025, nearly 30% more than in 2024. Europe accounted for 36%, Asia-Pacific 32%, the Middle East and North Africa 15%, North America 13%, and Latin America and Africa 2% each. Missiles, rockets and air defense represented 29% of contract value. These are newly signed agreements, often delivered over several years, rather than the value of equipment shipped in 2025.

Israel Aerospace Industries develops air and missile defense, unmanned aircraft, radar, satellites and civilian aircraft services. Its August 2026 report recorded first-half sales of $4.275 billion, net income of $449 million and an order backlog of $35 billion. The report identified Boaz Levy as chairman and Guy Bar Lev as acting president and CEO. A backlog records future contracted work; it is not revenue already earned.

Rafael is a state-owned defense manufacturer whose systems include Iron Dome, Iron Beam, Spike missiles, Trophy vehicle protection and SPYDER air defense. Its first-half 2026 results recorded sales of about NIS 10.6 billion, net profit of NIS 663 million and an end-June order backlog of NIS 75.8 billion. Sales and new orders increased, while the company reported delayed government payments and financing pressures.

Elbit Systems is a publicly traded defense company working in aerospace, communications, intelligence, electronic warfare, land and naval systems. It completed the acquisition of IMI Systems in November 2018. For the quarter ended June 30, 2026, Elbit reported revenue of $2.287 billion, GAAP net income of $173.6 million and a $32 billion order backlog. Its August report described an airborne high-power laser as under development, not an operationally deployed system.

The 2016 US–Israel memorandum covers fiscal years 2019–2028 and pledges, subject to congressional appropriations, $3.3 billion a year in Foreign Military Financing plus $500 million for missile defense. It phases out the regular allowance for purchases from Israeli manufacturers by fiscal 2028. The April 2024 supplemental separately provided $3.5 billion in FMF and $5.2 billion for missile and laser defense. The memorandum is a funding commitment, not an automatic appropriation or a mutual-defense treaty.

Plasan, based at Kibbutz Sasa, designs armor and protection systems for land vehicles, ships and aircraft. Its products include the SandCat family of armored vehicles and ATeMM electric mission modules. The group’s work covers design, testing, manufacture and integration of protection into other manufacturers’ vehicles. Its Plasan North America subsidiary, established in 2006, operates in Grand Rapids, Michigan.

Aeronautics was established in 1997 to develop unmanned aircraft. Its product history includes Aerostar, the Orbiter tactical family and the Dominator platform; Orbiter 5 was introduced in 2023. Rafael and Avichai Stolero acquired the company in 2019, taking it private, and its corporate profile identifies Rafael as its parent. The group also supplies sensors, communications and lifecycle support, including training, maintenance and upgrades.

Bet Shemesh Engines manufactures aircraft-engine parts and provides engine services through two operating segments. Its second-quarter 2026 report recorded revenue of $91.447 million and net profit of $16.003 million. Framework agreements totaled about $3.3 billion over periods of up to 16 years. The company explicitly states that those frameworks do not oblige customers to place specific orders; they should not be presented as guaranteed sales or a firm order backlog.

Bank Hapoalim was founded in 1921 by Zionist institutions and the Histadrut. It provides household and business banking, mortgages, capital-market services and international banking. Its August 11, 2026 report recorded net profit of NIS 2.488 billion for the second quarter and NIS 4.612 billion for the first half. Second-quarter return on equity was 15%, including the effect of the special bank tax.

Leumi traces its origins to the Jewish Colonial Trust, established in 1899, and its Anglo-Palestine Company subsidiary, incorporated in London in 1902. The first branch opened in Jaffa in August 1903. Today the bank provides personal, business, corporate and mortgage banking. Its August 12, 2026 results reported about NIS 2.8 billion in second-quarter net income, a 16.3% return on equity and NIS 719 billion in public deposits.

Discount Bank was founded in 1935 by Leon Recanati and provides retail and business banking. A planned sale of credit-card company CAL to Union and Harel did not close: on September 23, 2026, the buyers announced they would not complete the transaction after rejecting the Competition Authority’s conditions. Discount remained subject to a May 2027 divestment deadline and indicated it would seek an extension.

Mizrahi Bank was founded by the World Mizrachi movement in 1923 and opened to the public in 1925. It merged with Hapoel Hamizrahi in 1969 and with Tefahot Mortgage Bank in 2005; it acquired Union Bank in 2020. The group provides retail, business and mortgage banking. Its August 17, 2026 report recorded second-quarter net profit of NIS 1.43 billion and a 16% return on equity.

The Tel Aviv Stock Exchange was incorporated in 1953. It became a for-profit company in 2017 and listed its own shares in 2019. It provides markets for shares, bonds and derivatives, alongside clearing and settlement services. Its broad TA-125 index combines the companies in the TA-35 and TA-90 indices.

TA-35 tracks 35 large eligible companies listed on the Tel Aviv Stock Exchange. Its predecessor, TA-25, began in January 1992; the expansion to 35 shares took effect in February 2017. Index weights reflect free-float market value, subject to caps and eligibility rules. Its composition changes through scheduled reviews, so sector weights and company rankings should always be read with a date.

Established under the Securities Law of 1968, the Israel Securities Authority protects investors through disclosure requirements, market supervision and enforcement. Its responsibilities include public-company reporting, mutual funds and licensed investment advisers, marketers and portfolio managers. It also administers dual-listing rules and the licensing framework for payment companies introduced in June 2024.

The US–Israel free trade agreement entered into force in 1985, the first such agreement signed by the United States. USTR estimates bilateral goods and services trade at $54.2 billion in 2025, down 1.7% from 2024. Goods accounted for $34.4 billion: $13.7 billion in US exports to Israel and $20.7 billion in US imports from Israel.

The EU–Israel Association Agreement entered into force in June 2000. In 2025 the EU accounted for 31.7% of Israel’s goods trade: €43.3 billion, including €15.3 billion of EU imports from Israel and €28 billion of exports to Israel. The Commission proposed suspending trade preferences in September 2025; the proposal had not been adopted by September 2026, amid divisions among member states.

The UAE–Israel Comprehensive Economic Partnership Agreement took effect on April 1, 2023. It reduces or removes tariffs on more than 96% of tariff lines, representing 99% of trade value, with some reductions phased over time. Its 18 chapters also cover services, customs, rules of origin and digital trade. Preferential rates depend on the product and the agreement’s conditions.

India and Israel signed terms of reference for free trade negotiations in November 2025. Their second round took place in New Delhi on July 20–23, 2026, covering goods, services, origin rules, customs and other subjects. India’s Commerce Ministry reported bilateral merchandise trade of $3.93 billion in fiscal 2025–26. The proposed agreement remains under negotiation.

The Israel Diamond Exchange in Ramat Gan brings together traders in rough and polished diamonds. Its roots include the Israel Diamond Club, founded in Tel Aviv in 1937, and organizations merged in 1948. The Shimshon building opened in 1968. The exchange combines trading facilities and industry services; its membership should not be confused with the entire diamond industry’s workforce.

ZIM, founded in 1945, operates international container shipping services. In February 2026 it agreed to a proposed $4.2 billion acquisition by Hapag-Lloyd, alongside a separate Israeli operation backed by FIMI. The sale had not closed: on September 29, Israel’s Government Companies Authority ended its review of the original structure and required a new application for a revised deal. State approval is required under Israel’s special share in ZIM.

Israel recorded about 1.318 million tourist arrivals in 2025, compared with 962,000 in 2024 and 4.552 million in 2019. September 2026 recorded 135,500 tourist arrivals, against 113,700 in September 2025. January–September 2026 visitor arrivals, including day visitors, totaled 805,400, below 942,800 a year earlier. These are entries rather than unique people; airline availability and security disruptions continue to affect the sector.

Teva’s origins are in a Jerusalem medicines wholesaler founded in 1901; the Teva, Assia and Zori merger formed Teva Pharmaceutical Industries in 1976. It produces generic and innovative medicines, including AUSTEDO, AJOVY and UZEDY. Its July 29, 2026 report recorded second-quarter revenue of $4.142 billion and a net loss attributable to Teva of $576 million.

Strauss began as a family dairy business in Nahariya in 1936 and merged with Elite in 2004. Its businesses include dairy products, coffee, confectionery, snacks and water systems. The group sold its 50% share in Sabra to PepsiCo, which became Sabra’s sole owner on December 3, 2024.

ICL produces potash, bromine, phosphates and specialty mineral and plant-nutrition products. Second-quarter 2026 sales were $2.1 billion and net income attributable to shareholders was $137 million. A January 27, 2026 agreement valued its Dead Sea concession assets at $2.54 billion, plus eligible salt-harvesting investments and adjustments, for transfer when the current concession ends on March 31, 2030. The next concession is to be awarded competitively.

Israeli agriculture combines fruit and vegetable growing, livestock farming and technologies for water-scarce conditions. Netafim, founded at Kibbutz Hatzerim in 1965, helped commercialize drip irrigation. Recycled water and efficient irrigation reduce freshwater demand, but Israel remains a net importer of agricultural and food products. The OECD’s 2025 review describes drought, wartime disruption and labor availability as continuing constraints on farming.

The Bank of Israel's 2025 labor-market review reports average unemployment of 3.0% and labor-force participation of 62.7% among people aged 15 and over. Reserve duty and restrictions on Palestinian workers constrained civilian labor supply; recruitment of foreign workers only partly offset the shortage.

The Bank of Israel's 2025 assessment reports employment of 53% among Haredi men. Many men devote themselves to Torah study, while women's employment is much higher. Training, qualifications and workplaces compatible with religious observance shape the choices available to people seeking paid work.

The Bank of Israel reports that Arab women's employment reached 49% in its 2025 assessment, continuing a longer rise associated with education. Employment patterns differ by gender, locality and occupation. Access to transport, training and nearby jobs remains relevant to closing gaps in employment and earnings.

Founded in December 1920, the Histadrut is a federation of trade unions that negotiates collective agreements and represents workers in labor disputes. Its activities include organizing workplaces, legal assistance and campaigns on wages and employment conditions.

Restrictions on Palestinian workers after October 7, 2023 disrupted construction. The Bank of Israel reports that foreign-worker recruitment partly replaced the lost labor through 2025, but shortages persisted. Construction starts, completed homes and permits measure different stages of housing supply.

Repeated reserve duty removes workers from civilian employment and affects families and businesses. The Bank of Israel identifies mobilization as a labor-supply constraint in its 2025 report. Benefits and compensation depend on the applicable rules; the economic effect includes lost working time as well as public spending.

Housing affordability depends on prices, rents, household income and borrowing costs. The OECD's 2025 survey identifies planning delays and weak incentives for residential development as supply constraints. The Bank of Israel's 2025 review also records construction-worker shortages and an increased stock of unsold new homes.

In 2026, the standard corporate tax rate is 23% and VAT is 18%. Personal income tax is progressive, with a top ordinary rate of 47%; high incomes can attract additional surtaxes, including a separate 2% charge on qualifying capital income above the threshold. From 2026, a domestic top-up tax targets a 15% effective minimum for covered multinational groups with global revenue of at least €750 million.

The OECD's 2025 survey finds Israel's comparative price level among the highest in the organization, particularly for food and housing. It links high costs to trade barriers, limited competition and housing-supply constraints. A high price level is distinct from inflation, which measures how quickly prices change.