Mizrahi Tefahot Bank Sees Resilience and Growth Potential in Israeli Economy Amid Security Challenges

Ophir Morad, head of the business division at Mizrahi Tefahot Bank, presented the 2026 growth index and key insights at the Calcalist and Mizrahi Tefahot Growth Conference. He emphasized that despite Israel facing a multifront war for three years, the economy has shown remarkable resilience, with business sectors adapting daily to ongoing challenges. Morad noted that while investment and new factories have been limited, the market remains stable and forward-looking, with expectations of continued growth supported by lower interest rates, a strong shekel, and low inflation.

Morad highlighted that the first quarter saw a slight dip due to Operation Breaking Dawn, but the market is expected to rebound. He forecasted interest rates to decline to around 3-3.5%, which would encourage business expansion. Regarding the capital market, he said Israeli investors maintain confidence in local markets, enabling companies to raise funds and issue bonds despite security concerns.

Addressing technological advancements, Morad stressed the urgent need to increase AI adoption, with nearly half of businesses already using artificial intelligence to boost productivity and address labor shortages. On energy, he pointed out Israel’s robust energy sector, contrasting it with Europe’s challenges, and noted the regional impact on neighbors like Jordan and Egypt reliant on Israeli gas reserves.

Morad also discussed the defense industry’s significant role, not only through multi-billion-dollar orders but also by supporting the broader business ecosystem, including employment and logistics. He observed a recovery in the high-tech sector, with $5 billion invested in the first quarter and an anticipated $20 billion annually, despite currency fluctuations and operational consolidations.

Regarding real estate, Morad described a challenging market with demand lagging supply and workforce shortages following October 2023, which have since improved through human and technological solutions aimed at reducing construction times. He concluded by underscoring the importance of financing, with the banking and financial systems expanding their support, expressing cautious optimism for reduced uncertainty and sustained economic growth. Morad echoed former President Yitzhak Navon’s sentiment that Israel’s greatest asset is its human capital.