(Bloomberg) -- Israel revised down second-quarter growth as its ongoing war with Hamas in Gaza and fighting with Hezbollah took a heavier toll on the economy than previously thought.
Gross domestic product rose by an annualized 0.3% in the three months through June, in seasonally adjusted terms, according to a third and final evaluation by the Central Bureau of Statistics published Tuesday. The previous two estimates published in August and last month showed growth rates of 1.2% and 0.7% respectively.
The figure was lowered mainly due to a change in government consumption, which is now up 5.3% for the second quarter versus 8.2% in the previous estimate.
Israel’s projected annual GDP growth rate for 2024 was recently revised down by the Finance Ministry to 1.1% and by the central bank to 0.5%. S&P Global Ratings expects the growth rate to be 0%, it said in a recent statement, announcing a one notch downgrade of Israel’s sovereign credit rating to A.
One of the biggest drivers of the slowdown is exports, which declined for a third consecutive quarter, excluding diamonds and startup companies. Fixed-asset investments stagnated and are now estimated at slightly lower than previously projected.
Much of the slowdown in fixed investments is down to a slump in construction. The industry relies on Palestinian workers from the West Bank who have been barred from entering Israel since the start of the Gaza war. Bank of Israel Governor Amir Yaron recently called on the government to allow their return pending necessary security restrictions.
Israel has been at war with Hamas for more than a year with no end in sight, and the military last month stepped up an offensive against Hezbollah in Lebanon. Both groups are backed by Iran and considered terrorist organizations by the US.
(Updates with details about growth slowdown and construction industry. An earlier version of this story was corrected to clarify terrorist designations for various groups.)
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