Israel's economy grew ‌3.1% in 2025, official data showed on Monday, rebounding from a 1% pace in 2024, with growth expected to accelerate sharply ​as long as a fragile Gaza ceasefire holds.

Growth last year was led by a 7.1% rise in investment and a 5.9% ​gain in ​exports, along with a modest uptick in consumer spending. Heavy state expenditure during the two-year Gaza war, particularly on defence, gave an added boost to the economy, economists noted.

"The economy is ⁠recovering," said Yonie Fanning, chief strategist at Mizrahi Tefahot Bank. "The indications for the first quarter of 2026 are also positive - you see that in the trade balance data, etc. So I think it ... sets the basis for continued recovery."

Israel's economy in 2025 outpaced an OECD average of 1.7% and 2% growth in the United States. ​It also was ‌above the Bank of ⁠Israel's estimate of ⁠2.8%. The central bank projects a 5.2% growth spurt this year.

"What you're seeing now is excess demand coming after ​the war, which is coupled with an increase of supply also, for example, in ‌real estate. And so you see that in investment, and you ⁠should see that more going forward in 2026," Fanning said.

Per capita growth was 1.7% in 2025.

In the fourth quarter, gross domestic product grew an annualised 4.0% from the prior quarter, powered by a 33% jump in exports following an October ceasefire between Israel and Palestinian militant group Hamas.

"This is relatively robust print, especially the business sector activity, impacted by a strong contribution from net exports," said Leader Capital Markets Chief Economist Jonathan Katz.

A Reuters poll of economists had forecast an annualised 2.6% rate in the final three months of 2025.

Third-quarter GDP was revised to an annualised rise of 12.7% from a prior ‌estimate of 11.1%.

The GDP data follow data published on Sunday showing Israel's ⁠annual inflation rate eased to 1.8% in January - its lowest level since ​June 2021 - from 2.6% in December, increasing pressure on the Bank of Israel to lower short-term interest rates next week for a third straight meeting.

Following the inflation data, "most people (in the market) don't expect it to stay on hold," ​Fanning said.

The ‌shekel was flat at 3.09 per dollar, close to a 30-year peak hit ⁠earlier in February. Tel Aviv share indices gained ​as much as 0.3%.

(Reporting by Steven Scheer; Editing by Alex Richardson and Ros Russell)