Israel: 2026 Article IV Consultation-Press Release; Staff Report; and Statement by the Alternate Executive Director for Israel

The 2026 Article IV Consultation highlights that the elevated regional tensions are casting a shadow on Israel’s economy. The elevated regional tensions are casting a shadow on Israel’s economy. Growth forecasts for 2026 have been revised down to 3.5 percent from 4.8 percent before the war in the Middle East, while inflation is expected to rise temporarily due to higher energy prices and supply constraints despite shekel appreciation. The conflicts’ economic repercussions and longstanding labor market challenges weigh on the medium-term outlook. With medium-term growth challenges looming, key priorities include rebuilding fiscal buffers, raising labor supply and productivity, and ensuring price and financial stability. Raising labor supply and productivity is now more urgent to overcome post-conflict challenges and lift medium-term growth. Priorities include increasing labor force participation across the population, improving infrastructure, advancing product market reforms, and maintaining a competitive edge in high tech.