The last quarter of 2024 delivered solid economic figures for Israel's economy. The economy rebounded in the final months of the year, lifting the overall growth rate for 2024—a year marked by war, massive defense spending, and uncertainty—to 1%. While this exceeded initial forecasts of just 0.5% growth, the public remains unimpressed.

As time passed, the economy recovered, and this was reflected in the budget deficit figures. Many mocked Finance Minister Bezalel Smotrich when he confidently bet in September that the deficit would end up lower than the target, even wagering a bottle of whiskey on it. His comment was widely ridiculed at the time, but in the end, he was right. And where are the skeptics now? They’ve disappeared or are now claiming this is a temporary anomaly and that the situation is still dire. If you don’t like the outcome, you can always dismiss it as irrelevant, unrepresentative, or a one-off event.

The bottom line is that Smotrich was correct—the deficit did decline. It finished the year at 6.9%, well below the approved ceiling of 7.7%, and is expected to drop further to 4.5% in 2025. The economy grew by 1% in 2024, which is a reasonable figure given the circumstances of a full-scale war. Naturally, expectations are for stronger growth going forward. The Bank of Israel projects GDP growth of 4%-4.5% this year.

So Why Aren't We Excited?

The lack of enthusiasm isn’t about politics. The macroeconomic numbers look decent, but at the micro level, people are feeling the squeeze. Taxes have increased, and the financial burden on households is estimated at an additional 800 shekels per month for the average family. There is also justified criticism regarding the allocation of resources and how the burden of new financial constraints is distributed across different segments of the population.

Yes, it’s nice to have growth, and it supports the broader economy and markets. But what does that mean for people struggling with rising costs at the grocery store? Where are the finance and economy ministers who promised lower prices and relief from the cost-of-living crisis? They will, of course, point to Israel’s economic resilience, but the reality is they’ve failed where it matters most—helping the average citizen.

Macro figures are important, but when a large portion of the population has to cut down on everyday purchases due to persistent price hikes, economic resilience doesn’t mean much. Yes, the war created difficult conditions, but even before and during the crisis, the government didn’t do much—some would even argue they made it worse.

People are now bearing the financial brunt of a difficult year, hoping for improvement in the future. Israel’s economy has shown impressive resilience over the past 18 months, thanks in part to strong prior years. But that isn’t enough. The public, which plays just as vital a role as policymakers in maintaining economic strength, has found itself burdened with new financial strains—some necessary, but distributed unequally.

Meanwhile, employment and wage data show that salaries are rising, which is good news. Wage increases have outpaced inflation. Yet, for most of the population, 2025 will still be a year of financial tightening. If interest rates drop later in the year and the economy sees meaningful growth, this should eventually trickle down to individuals.

Fourth Quarter: 2.5% Growth

Returning to the latest economic figures, Israel’s GDP grew 1% in 2024, though GDP per capita fell by 0.3%. Growth was 2% in 2023 and 6.5% in 2022.

According to the Central Bureau of Statistics, business sector output declined by 0.6% in 2024, but government spending surged by 13.7%, offsetting the drop in business activity. This is one reason why the economic growth doesn’t feel tangible—much of it was driven by government expenditures, particularly in defense, which soared 43%. Meanwhile, civilian public spending rose by just 4%.

In the fourth quarter, GDP grew at an annualized rate of 2.5%, boosted by several factors, including a 9.5% surge in private consumption, partly due to a rush to purchase vehicles before tax hikes took effect. Additionally, investment in fixed assets jumped 14.7%.

At the same time, labor market data showed that unemployment remains historically low. The percentage of workers absent from their jobs for an entire week due to economic reasons dropped to 3.8%, down from 8.9% in the previous month. Absences due to military reserve duty also fell significantly, from 22.2% to 11.3%.

The Economy Is Holding Up, But Public Sentiment Remains Low

Despite the better-than-expected numbers, the economic frustration is real. While Israel’s economy has demonstrated resilience, the reality for everyday citizens is that expenses are rising, wages—despite increasing—still struggle to keep up, and economic uncertainty remains high. The government may celebrate its macroeconomic success, but until relief reaches individuals in a tangible way, the skepticism will remain.