Hebrew Newspaper: The International Monetary Fund Provides a Contradictory Report on the Israeli Economy

Sada News Economics Translation - On Thursday, the International Monetary Fund published a preliminary report on the Israeli economy, following a visit by a fund delegation to the country.

According to the Hebrew economic newspaper Globes, as translated by Sada News Economics Section, the report presented a contradictory picture of the Israeli economy.

The newspaper indicated that the report, on one hand, assesses the resilience of the economy, which quickly recovered after the ceasefire in Gaza, while on the other hand, it clearly warns of the insufficiency of the current fiscal policy and provides recommendations for measures likely to be adopted reluctantly by the Israeli government.

The fund forecasts the Israeli economy to grow by 4.8 percent in 2026, after recording a growth of 2.9 percent in 2025 following the ceasefire agreement in the Gaza Strip; however, renewed tensions in the region may limit growth, it said.

The fund stated that economic activity accelerated at a significant pace after the ceasefire in October, and assuming combat actions do not resume, growth is expected to receive short-term support from "currently limited private consumption and a recovery in investment, while government consumption will decline".

This discrepancy reflects the fund's more cautious assessment of the economic recovery following the war, as the Hebrew newspaper mentioned and translated by the Sada News Economics Section.

Even in the medium term, the forecasts appear less optimistic than those in Israel, as the International Monetary Fund expects growth to slow to just 3.5% in the coming years, "down from less than 4% before the war," which is a figure much lower than the Bank of Israel's expectation of 4.3% of GDP in 2027.

The detailed reasons included in the report are the rise in defense spending, which will persist for years to come, ongoing recruitment of reserve forces, increased risk premiums, and decreased job opportunities for non-Israeli workers.

Economists at the International Monetary Fund expressed their concerns regarding the government's fiscal policy, as the fund notes that the 3.9% deficit ceiling in the 2026 budget proposal "represents a step in the right direction but is insufficient to put public debt on a downward path".

The fund recommended achieving a deficit of 2.4% by 2029 to bring the debt back to 60% of GDP - a level that Israel reached in 2022 before it jumped to 68.6% by the end of 2025. On the other hand, the Treasury Department speaks of a long-term plan to reduce GDP to that point, which will extend over a full decade.