FX.co ★ Israel’s Economy Swings into Reverse as Annualized Q1 GDP Contracts 3.3%

Israel’s economic momentum sharply reversed at the start of 2026, with annualized GDP shrinking by 3.3% in the first quarter, according to data updated on 17 May 2026. The contraction marks a stark turnaround from the 3.3% annualized expansion recorded in the fourth quarter of 2025.

The figures are presented on a quarter-over-quarter annualized basis, meaning the current reading reflects the pace of change in output in the first quarter of 2026 compared with the previous quarter, scaled to an annual rate. Similarly, the prior 3.3% figure captured the strength of growth in the fourth quarter of 2025 relative to the third quarter.

This swing from solid growth to contraction highlights mounting short‑term pressures on Israel’s economy and signals a more fragile outlook for 2026, as the country moves from a period of expansion at the end of last year into an early‑year downturn.