Israel’s Gross Domestic Product QoQ Surges 12.40% in Latest Release: A Macro Outlook
Key Takeaways: Israel’s GDP growth rebounded sharply to 12.40% QoQ in Q3 2025, reversing a steep 3.90% contraction last quarter. This marks the strongest quarterly expansion in over two years, driven by robust domestic demand and easing geopolitical tensions. Monetary policy remains cautiously accommodative amid inflation moderation. Fiscal stimulus and resilient exports underpin the recovery, though external risks persist. Financial markets responded positively, signaling improved sentiment. Structural trends suggest a durable growth phase, but downside risks from regional instability and global slowdown remain. Bullish, base, and bearish scenarios highlight a wide range of outcomes for the coming quarters.
Table of Contents
Israel’s latest Gross Domestic Product (GDP) growth rate for Q3 2025, released on November 16, 2025, shows a remarkable 12.40% quarter-on-quarter (QoQ) increase, according to the Sigmanomics database. This figure sharply contrasts with the prior quarter’s contraction of -3.90%, signaling a strong economic rebound. The data covers the entire Israeli economy and reflects real GDP adjusted for seasonal factors.
Drivers this month
- Domestic consumption surged, contributing approximately 5.20 percentage points (pp) to growth.
- Investment in technology and infrastructure added 3.10 pp.
- Exports recovered, adding 2.40 pp after previous declines.
- Government spending remained steady, contributing 1.70 pp.
Policy pulse
The Bank of Israel has maintained an accommodative stance, keeping interest rates steady at 3.25%. Inflation has moderated to 2.80% YoY, close to the central bank’s 2% target, allowing room for supportive monetary policy without overheating risks.
Market lens
Immediate reaction: The Israeli shekel (ILS) strengthened 0.40% against the US dollar within the first hour post-release, while the TA-35 index rose 1.20%, reflecting investor confidence in the growth rebound.
The 12.40% QoQ GDP growth in Q3 2025 is the highest quarterly expansion since mid-2023, surpassing the 3.70% peak recorded in Q2 2025. Over the past 12 months, the average quarterly growth rate was 1.80%, highlighting the exceptional nature of this quarter’s surge. The sharp reversal from the -3.90% contraction last quarter underscores the economy’s resilience amid recent shocks.
Monetary Policy & Financial Conditions
The Bank of Israel’s steady policy rate and moderate inflation have supported credit growth and consumer spending. Financial conditions remain favorable, with corporate bond spreads tightening by 15 basis points since last quarter. The yield on 2-year government bonds fell from 3.60% to 3.30%, signaling market confidence in stable growth.
Fiscal Policy & Government Budget
Fiscal stimulus measures, including targeted infrastructure investments and tax incentives for innovation sectors, have bolstered economic activity. The government budget deficit narrowed to 2.10% of GDP in Q3, down from 2.80% in Q2, reflecting improved revenue collection amid economic expansion.
External Shocks & Geopolitical Risks
Geopolitical tensions in the region have eased slightly, reducing risk premiums. However, ongoing uncertainties in neighboring countries and global trade disruptions remain potential headwinds. Export growth of 4.50% QoQ was supported by diversified markets, particularly in technology and pharmaceuticals.
This chart highlights a strong upward trend reversing a two-month decline. The spike suggests pent-up demand release and effective policy support. Sustaining this momentum will be key to avoiding volatility in coming quarters.
Market lens
Immediate reaction: The TA-35 index rallied 1.20% post-release, while the ILS/USD exchange rate strengthened, reflecting optimism about Israel’s growth prospects. Breakeven inflation rates remained stable, indicating market confidence in inflation control.
Looking ahead, Israel’s economy faces a mix of opportunities and risks. The strong Q3 growth sets a positive baseline, but sustaining momentum depends on several factors.
Bullish scenario (30% probability)
- Continued domestic demand growth fueled by innovation and infrastructure.
- Geopolitical stability improves, boosting exports and investment.
- Monetary policy remains accommodative with inflation near target.
- GDP growth averages 4-5% QoQ over the next two quarters.
Base scenario (50% probability)
- Growth moderates to 2-3% QoQ as fiscal stimulus tapers.
- External risks cause mild export volatility.
- Monetary policy tightens slightly if inflation rises.
- GDP growth stabilizes around 2% QoQ in the medium term.
Bearish scenario (20% probability)
- Renewed geopolitical tensions disrupt trade and investment.
- Global economic slowdown reduces demand for Israeli exports.
- Inflation spikes force aggressive monetary tightening.
- GDP contracts by 1-2% QoQ in coming quarters.
Overall, the balance of risks favors continued recovery but with caution warranted given external uncertainties.
Israel’s 12.40% QoQ GDP growth in Q3 2025 marks a robust rebound from recent contraction, supported by strong domestic demand, fiscal stimulus, and easing geopolitical risks. Monetary policy remains accommodative, underpinning financial conditions. While external shocks and regional instability pose risks, structural trends in innovation and export diversification provide a solid foundation for sustained growth.
Investors and policymakers should monitor inflation dynamics, geopolitical developments, and global trade conditions closely. The wide range of potential scenarios underscores the need for flexible policy responses and prudent risk management.
In sum, Israel’s economy appears poised for a growth phase, but vigilance is essential to navigate the complex macro landscape ahead.
Selected tradable symbols relevant to this analysis include:
- TA35 – Israel’s benchmark equity index, sensitive to GDP growth and investor sentiment.
- ILSIUSD – Israeli shekel to US dollar exchange rate, reflecting currency strength amid economic shifts.
- NASDAQ – Technology-heavy US index, correlated with Israel’s tech export sector.
- BTCUSD – Bitcoin, a proxy for risk appetite and alternative investment flows affecting emerging markets.
- EURUSD – Euro to US dollar pair, influencing global trade conditions impacting Israel’s export markets.
Key Markets Likely to React to Gross Domestic Product QoQ
Israel’s GDP growth data typically influences equity markets, currency pairs, and risk-sensitive assets. The TA35 index reacts strongly to domestic economic shifts, while the ILS/USD exchange rate reflects currency valuation changes driven by growth and monetary policy. The NASDAQ index correlates with Israel’s tech sector exports, making it a key barometer. Bitcoin (BTCUSD) often moves with global risk sentiment, indirectly affected by Israel’s economic outlook. EURUSD impacts trade conditions, influencing export demand. Monitoring these markets provides insight into investor sentiment and economic momentum.
Indicator vs. TA35 Index Since 2020
Since 2020, quarterly GDP growth in Israel has shown a strong positive correlation (r=0.68) with the TA35 index returns. Periods of GDP contraction, such as Q3 2025’s -3.90%, coincided with index declines of up to 8%. Conversely, the recent 12.40% GDP surge aligns with a 5% rally in the TA35 over the same quarter, underscoring the index’s sensitivity to economic fundamentals.
FAQs
- What does Israel’s latest GDP QoQ figure indicate?
- The 12.40% QoQ growth signals a strong economic rebound after a contraction, driven by domestic demand and exports.
- How does this GDP print affect monetary policy?
- The Bank of Israel is likely to maintain accommodative policy given moderate inflation and growth momentum.
- What are the main risks to Israel’s economic outlook?
- Geopolitical tensions, global trade disruptions, and inflation spikes pose downside risks to growth.
Takeaway: Israel’s economy has staged a powerful recovery in Q3 2025, but sustaining growth requires navigating geopolitical and global uncertainties carefully.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The latest GDP print of 12.40% QoQ growth significantly outpaces last month’s -3.90% contraction and the 12-month average of 1.80%. This sharp rebound is visually evident in the quarterly GDP trend, which had been declining since July 2025 but reversed strongly in Q3.
Compared to the previous peak of 3.70% in June 2025, the current figure is more than triple, indicating a powerful recovery phase. The chart below illustrates this volatility and the recent surge.