Gross domestic product (GDP) grew an annualised 2.8% in the July-September period from the prior three months, compared with a forecast in a Reuters poll of analysts for a 3.8% expansion.
However, on a per capita basis, GDP grew 0.9%.
The economy grew 3.3% in the second quarter, compared with 3.1% in a prior estimate.
Israel's economy is expected to contract in the fourth quarter due to the war, and translate to a 2.3% growth rate for 2023, according to the Bank of Israel. S&P Global Ratings this week forecast a 5% contraction during the last three months of 2023.
Despite a weakening economy that will likely see a hit to consumer spending and investments, the central bank has suggested it would not lower interest rates during the war.
It has cited a view that Israel's risk premium remains high and a rate cut from the current 4.75% could further weaken the shekel and reignite inflation.
Policymakers have left short-term borrowing costs unchanged the last three decisions after an aggressive run of tightening that took the benchmark interest rate from 0.1% in April 2022 to 4.75% in May 2023.
On Wednesday, the bureau said Israel's annual inflation rate eased to 3.7% in October from 3.8% in September and the central bank has said it was determined to return the rate to its 1-3% target. The Bank of Israel's next rate decision is on Nov. 27.
In the third quarter, private spending - more than half of economic activity - grew 1.8%, while exports rose 8.8%, investment increased 1.2% and government spending was up 5.9%. Imports fell 0.9%.
(Reporting by Steven Scheer; Editing by Bernadette Baum)
By Steven Scheer
