Israel growth forecast cut amid war; economy seen expanding 3.3-3.8% in 2026

Israel's Finance Ministry have said that the country's economy is expected to grow at 3.3 per cent and 3.8 per cent in 2026. The economy is likely to shrink in the first three months as the war with War continues. The country's economy is expected to grow by 3.8 per cent Iran ends by mid-April, and fighting with Iran-backed Hezbollah in Lebanon finishes by the end of April. But if the fighting continues till the end of April. If it continues through June, then the economy is likely to grow by 3.3 per cent.

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According to Finance Ministry Chief Economist Shmuel Abramzon, the economy will end the first quarter with negative growth of 9.5 per cent in annual terms and 2.5 per cent in quarterly terms. Earlier this month, the growth forecast was downgraded from 5.2 per cent to 4.8 per cent in 2026, on the assumption that the war with Iran would end soon. However, the war has expanded significantly. Both countries are at a phase of stalemate and without any off-ramp.

"Since this scenario did not materialise and the fighting was prolonged and is still ongoing, the Chief Economist’s Department updated its economic growth forecasts under a number of possible scenarios depending on the continuation of the fighting,” said the Finance Ministry of Israel.

The Israeli Knesset on Monday approved a defence-heavy budget of 699-billion shekel ($221 billion), which would allow Prime Minister Benjamin Netanyahu's government to avert a snap election within 90 days. For FY27, the economy is expected to grow by 5.3 per cent to 6.1 per cent. - Write SEO package