Shekel up 11%, stocks up 35%: A Strong economic year for Israel

Israel's Ministry of Finance released a set of headline macroeconomic indicators ahead of Rosh Hashanah, the Jewish New Year, a major holiday marking the start of the Hebrew calendar year and traditionally a moment for reflection and stocktaking, including on the state of the economy.

The data points to a robust economic expansion driven by disinflation, strong capital inflows and a resurgent tech sector.

Real GDP grew at an annualized 3.2% in the first half of 2026 compared with the second half of 2025, alongside near-full employment, with unemployment holding at 3.3%. Inflation eased to 1.5% year-over-year, down from 2.5% a year earlier, placing it comfortably within the Bank of Israel's target range. 

Nominal GDP per capita is projected to reach roughly $70,000 in 2026, keeping Israel among the world's highest-income economies.

Surging foreign investment and market gains

Foreign direct investment jumped 78% to $26 billion in 2025, with strong inflows continuing into the first half of 2026.

This capital influx has fueled sharp asset appreciation: the benchmark TA-125 index gained 35% over the past year, while the shekel strengthened 11% against the US dollar. The central government budget deficit, meanwhile, narrowed from 4.7% to 3.3% of GDP over the past twelve months.

High-tech remains the economy's primary growth engine. Venture capital and private equity funding raised by Israeli startups rose 53.6% in the first half of 2026 compared with the same period last year, with artificial intelligence continuing to anchor the sector's expansion, Israel maintains top-tier global rankings in AI commercialization, patent output and specialized R&D capacity.