Israel GDP Expands by +15.4 qoq annl, in Large Upside Surprise

Economics Research 16 August 2026 | 11:35PM BST

Israel: GDP Expands by +15.4%qoq annl, in Large Upside Surprise

Bottom Line: Israel’s GDP expanded by +15.4%qoq annl in Q2 (+3.6%qoq), following Johan Allen | a -2.2%qoq annl contraction in Q1 (revised up from -3.3% in the flash print and Goldman Sachs International -3.8% following the second release). This was a large upside surprise to consensus Kevin Daly expectations (+8.3%qoq annl.) and our forecast (+7.1%). Israeli GDP data are | Goldman Sachs International relatively volatile from quarter to quarter, and this volatility has been significantly exacerbated over the past three years by war/conflict-related disruption to economic activity. Given the difficulty of capturing this volatility, we think the likelihood of relatively large revisions to this print is high, since interpolation efforts applied in early GDP prints are more challenging than usual.

In terms of composition, the driver of the print was a sharp rise in domestic demand, in particular government consumption (which came in above our forecast) and household consumption. Additionally, net exports strengthened due to a large increase in exports, which outweighed higher imports.

As a mechanical consequence of the large upside surprise, our 2026 GDP forecast has increased from +2.3% to +3.1% (we have lowered Q3 moderately, on the assumption that there will be some ‘pay-back’ from the exceptional strength in Q2). The near-term economic outlook remains highly uncertain, reflecting both domestic and external factors, although in the absence of a geopolitical re-escalation, we would characterise risks to our GDP forecast as skewed to the upside.

Alessa Abraham*, Johan Allen and Kevin Daly

*Alessa is an intern in the CEEMEA economics team

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 GDP (%yoy) GDP (%qoq annualized, sa) sa, %qoq annl. Household consumption - Government consumption Gross capital formation - Gross fixed capital formation Industrial investment Residential investment Exports - Imports -

Source: Goldman Sachs Global Investment Research, Haver Analytics