Moody's Raises Israel's Growth Forecasts, Citing Overseas Company Output
Translated & summarized from Al-Shams by baba
Moody's has raised Israel's economic growth forecasts for 2026 and 2027, attributing the increase to revised calculations for overseas company output, particularly in AI. While fiscal forecasts improved, Moody's warned that political and institutional risks, such as threats to judicial independence, could still affect creditworthiness. The agency noted that the growth figures do not necessarily indicate a domestic economic improvement or increased household income.
The story in 6 lines · by baba
- Moody's raised Israel's 2026 economic growth forecast to 5% from 3.7% due to overseas company output.
- The agency also increased the 2027 growth forecast to 6% from 5%.
- Bank of Israel figures show lower growth when overseas output is excluded.
- Moody's lowered the 2026 budget deficit forecast to 5% of GDP and debt-to-GDP to 68.5%.
- The agency warned that undermining judicial independence could impact creditworthiness.
- Increased growth forecasts may not reflect domestic economic improvement or household income gains.
Credit rating agency Moody's has revised its economic growth forecasts for Israel upwards, primarily due to a change in how it calculates the output of companies operating abroad, particularly in the artificial intelligence sector. This adjustment inflates growth estimates without necessarily reflecting an improvement in the domestic economy.
Under the new projections, Israel's economy is expected to grow by 5% in 2026, an increase from the previous forecast of 3.7%, and by 6% in 2027, up from 5%. These figures contrast with projections from the Bank of Israel, which anticipates 5.6% growth in 2026 and 7.5% in 2027. However, when excluding the output of companies operating overseas, the Bank of Israel's figures drop to 3.4% and 5.1% respectively.
In terms of fiscal health, Moody's lowered its forecast for the 2026 budget deficit from 5.9% to 5% of GDP and reduced the debt-to-GDP ratio estimate from 70.1% to 68.5%, attributing this improvement to higher tax revenues.
Despite these positive fiscal indicators, Moody's maintained reservations regarding political and institutional risks. The agency warned that undermining judicial independence and the balance of powers could negatively impact Israel's creditworthiness assessment.
These developments suggest that the increased growth forecasts do not automatically translate into improved household income, job opportunities, or purchasing power, especially since a portion of the reported growth stems from economic activity conducted by companies outside Israel.
