IMF cuts Israel growth forecast to 3.5% for 2026 amid regional tensions

The International Monetary Fund has revised down its economic growth forecast for Israel in 2026 to 3.5%, a decrease from the previously projected 4.8%. This adjustment comes in response to heightened regional tensions, including ongoing conflicts with Iran, Hezbollah, and Hamas.

The IMF's report, released on Wednesday, also indicated expectations of a temporary surge in inflation, primarily driven by increased energy prices and supply chain disruptions. This outlook persists even as the Israeli shekel has strengthened to its highest level against the U.S. dollar in over three decades.

"The elevated regional tensions are casting a shadow on Israel's economy," the IMF stated, highlighting the impact of geopolitical uncertainty. While acknowledging the Israeli economy's demonstrated resilience in the face of repeated shocks, the Fund noted that persistent geopolitical risks and long-standing structural challenges are likely to weigh on future economic performance.