Israel's economic momentum, which surged in the first quarter of 2024, has dramatically slowed in the second quarter, revealing underlying vulnerabilities in the nation's economy. Data released by Israel's Central Bureau of Statistics on Sunday showed a modest 1.2 percent increase in GDP for Q2, a stark contrast to the robust 17.3 percent growth experienced in Q1.

This sharp deceleration underscores the challenges facing the Israeli economy, which has yet to fully recover from the aftershocks of the October 7, 2023, Hamas attack. On an annual basis, the economy shrank by 1.4 percent, reflecting a broader trend of economic contraction.

The slowdown is particularly evident in consumer behavior. Private consumption, which had surged by 26.3 percent in the first quarter, grew by only 12 percent in Q2, signaling a significant reduction in domestic spending. This decline in consumer confidence may be linked to the ongoing regional instability and the economic uncertainty it breeds.

Further compounding the economic concerns is the decline in both imports and exports. The import of goods and services fell by 11.1 percent in Q2, following a 32.7 percent increase in Q1, suggesting weakening demand within the Israeli economy. Exports, excluding diamonds and start-ups, also declined by 7.1 percent in Q2 after a 10.4 percent decrease in the previous quarter, highlighting the challenges facing Israeli manufacturers and exporters in a tense geopolitical climate.

This economic downturn coincides with escalating tensions in the region, particularly Israel's ongoing military operations in Gaza, which have drawn international scrutiny and accusations of genocide. The International Court of Justice has ordered Israel to cease its offensive in Rafah, where over a million Palestinians have sought refuge. These developments add further strain to an already fragile economic landscape, raising questions about Israel's economic resilience in the face of ongoing conflict.