IMF Raises Israel Growth Forecast, Warns on Global Debt

The International Monetary Fund (IMF) has upgraded its economic growth forecast for Israel in 2026 to 4.5%, a full percentage point higher than its previous estimate of 3.5% in April. The forecast for 2027 remains unchanged at 4.4%. This upward revision for Israel comes as the global economy faces slowdowns and rising inflation, and notably contrasts with downward revisions for the broader Middle East and North Africa region. The IMF report, "World Economic Outlook," also projects Israel's inflation to decrease to 1.8% in 2026, down from 2.3% previously, a trend opposite to global and developed country forecasts.

While the IMF's revised outlook for Israel is positive, it is slightly lower when considering a two-year cumulative growth compared to the Bank of Israel's July forecast, suggesting the IMF anticipates some growth shifting from 2027 to 2026. Israel's unemployment rate is expected to remain stable at around 3%, and the current account surplus is projected to shrink to 1.1% of GDP.

Globally, the IMF warns of increasing pressure on major economies to curb fiscal deficits and rebuild financial buffers due to high debt levels and rising borrowing costs. Global growth is forecast to slow from 3.5% in 2025 to 3.1% in 2026, with global inflation expected to rise to 4.7% in 2026 before falling. The IMF highlights that governments have depleted fiscal reserves responding to the pandemic and now face limited maneuverability due to aging populations, climate change, and national security needs.

The IMF identifies significant downside risks to its global outlook, including a prolonged or escalated conflict in the Middle East, which could keep energy and food prices high and worsen fiscal balances. Additionally, a reassessment of artificial intelligence investment returns could reduce investment and tighten financial conditions. The organization calls for targeted measures to rebuild economic safety nets.