Bank of Israel projects 5.6% GDP growth in 2026, 7.5% next year

The forecast assumes fighting will remain at its current low intensity, easing constraints on the economy.

By JNS

The Bank of Israel forecasts that Israel’s gross domestic product will grow by 5.6% in 2026 and 7.5% in 2027, according to projections released on Wednesday.

Excluding overseas production by multinational companies registered in Israel, the bank projects growth of 3.4% this year and 5.1% next year.

The central bank said the adjusted measure better reflects domestic economic activity, as production abroad does not necessarily generate comparable increases in Israeli employment or household income.

“This component contributes in part to government tax revenues, but it does not utilize domestic capital or labor, and most of the income it generates does not accrue to Israeli households,” Bank of Israel Governor Amir Yaron said on Wednesday.

“As a result, its rapid growth may create a distorted picture of the pace of real domestic economic activity.”

The forecast assumes fighting will remain at its current low intensity, easing constraints on the economy.

Even so, the bank expects output excluding production abroad to remain below its prewar trend through the end of 2027, partly because of a slow recovery in workforce participation.

“At the same time, the Israeli economy remains resilient and robust,” Yaron said. “Nevertheless, uncertainty remains elevated in view of geopolitical developments.”

The bank expects the broad unemployment rate among people ages 25–64 to average 4.6% this year before falling to 3% in 2027.

Consumer prices are forecast to rise by 1.5% this year and 2.1% next year, comparing average prices in the final three months of each year with the same period a year earlier.