Israel’s war against Hamas took a slightly larger toll on economic growth in the final three months of 2023 than previously thought.

Gross domestic product decreased an annualized 21.0% in the fourth quarter over the third quarter, declining 5.7% at a quarterly rate, the Central Bureau of Statistics reported Tuesday. This third estimate followed a 19.4% decline in its preliminary estimate, which was revised to a 20.7% contraction last month.

GDP is a measure of the value created through the production of goods and services in a country. It is often used as a measure of the health of an economy.

The fourth-quarter contraction in the market was directly impacted by the outbreak of the Israel-Hamas war, the statistics bureau said. The makeup of the GDP changed due to the large call-up of reserve forces, payments for housing for the evacuees, a lack of manpower in the construction industry, and more factors, it said.

There was an 83.7% annualized increase in government spending in the fourth quarter compared with the third quarter.

An illustrative image indicating financial trouble for the Israeli economy.
An illustrative image indicating financial trouble for the Israeli economy. (credit: INGIMAGE)

There was also a 26.9% annualized drop in private consumption, a 22.5% annualized drop in export of goods and services, and a 42.4% annualized drop in imports of goods and services in the fourth quarter compared with the third quarter.

Israel's Q4 affected by war outbreak

There was a 20.7% annualized increase in government spending, a 7.9% annualized decrease in private consumption, and a 15.2% annualized decrease in the import of goods and services in the fourth quarter of 2023 compared with the fourth quarter of 2022.

The annual inflation rate rose to a slightly more than expected 2.7% in March from 2.5% in February, the statistics bureau reported Monday.