The nation of Israel is recognized as one of the most advanced economies in the world—a top exporter of oil, diamonds and other precious gems, machinery, electrical equipment, pharmaceuticals, plastics, aircraft and chemicals.

However, the ongoing Israel-Hamas war has disrupted the once-robust Israeli economy. Last year, the country experienced a 1% increase in gross domestic product (GDP) growth compared to pre-war estimates within the 4-5% range, the U.S. Department of State reports.

“Increased war-related spending created significant budget deficits, triggering credit downgrades in 2024, though Israel’s debt remains investment grade,” the report reads. “Forecasts for 2025 GDP growth average about 3%. The high-tech sector is the primary growth engine of the Israeli economy, accounting for roughly 12% of the workforce, 20% of GDP and 53% of exports. Its resilience throughout the war remains a bright spot.”

On Sept. 29, the Bank of Israel kept its benchmark interest rate unchanged at 4.5%, aligning with market expectations, according to Trading Economics. Meanwhile, annual inflation eased to 2.9% in August, its lowest level in a year, bringing it back within the government’s target range of 1–3%.

Israel’s labor market remains tight, largely contributed by reserve mobilization and shortages of non-Israeli workers. “Meanwhile, economic activity is gradually recovering, supported by consumer spending, investment and construction, although several indicators remain below pre-conflict levels,” the Trading Economics report reads. “Elevated defense spending and a stronger shekel also influence the economy. Looking ahead, the central bank indicated that future rate decisions will balance inflation, economic growth, financial stability and fiscal considerations amid ongoing geopolitical risks.”

Customer payment behavior in Israel has remained relatively steady compared to last year. In August, customers averaged 10 days beyond terms—a six-day improvement from the same period in 2024, according to FCIB’s Credit and Collections Survey.

Survey responses on payment delays in August were evenly split. Half of the respondents reported an increase in delays, down 7% from last year. The remaining half indicated that delays remained consistent, whereas 29% of respondents in the prior year had reported an increase.

While the leading cause of payment delays last year was customer payment policy (67%), this year it shifted to billing disputes, cited by 75% of respondents. “There are no real issues here,” one respondent shared. “We make a private label brand for our company, so we require funds upfront for their specialty products.” Another respondent advised credit professionals to truly understand their customers—specifically their legal entity and financial capacity to meet obligations.