IMF Raises Israel 2026 Growth Forecast to 4.5% Amid Global Energy Shocks

The International Monetary Fund (IMF) has revised Israel's growth forecast for 2026 upward to 4.5%, compared to 3.5% in its April projection—an upward revision of a full percentage point. This comes from the World Economic Outlook report published this morning. However, the forecast for 2027 remained unchanged at 4.4%.

Comparing these projections to the Bank of Israel Research Department's forecasts tempers the enthusiasm. In July, the Research Department projected 4% growth for 2026 and 5.5% for 2027. While the IMF is more optimistic about the current year, its forecast for next year is 1.1 percentage points lower than the Bank of Israel's. Cumulatively over the two years, the IMF's forecast is lower than the Bank of Israel's: roughly 9.1% compared to about 9.7%. In other words, the Fund does not foresee more overall growth for the Israeli economy; rather, it is shifting some of the expected 2027 growth into 2026.

Inflation and Regional Context

This improvement stands out against the broader regional environment. In the same report, the IMF cut its growth forecast for the Middle East and North Africa for 2026 due to the prolonged closure of the Strait of Hormuz. The report does not include specific verbal commentary regarding Israel.

Expected inflation in Israel for 2026 dropped to 1.8%, down from 2.3% in April. This is an unusual development, as global inflation forecasts and those for advanced economies were revised upward by 0.3% to 0.5%. This indicates that the IMF believes inflation has impacted Israel less severely than previously estimated. Unemployment projections show virtually no significant changes, hovering around 3%, while the current account surplus is expected to shrink to 1.1% of GDP from nearly 2% in the previous forecast.

Global Energy Shocks and Debt Pressures

Globally, the IMF now assumes an average oil price of $95.7 per barrel in 2026—16% higher than its April assumption—with the Strait of Hormuz reopening only in March 2027. European gas prices are expected to be roughly 36% higher than April assumptions, and food prices are projected to rise by 5% this year. Global inflation is expected to climb to 4.7% in 2026 before easing slightly to 4.1% in 2027.

The IMF's message is sharp: every increase in expenditure or tax reduction must have a secured funding source.

Public debt in advanced economies is projected to rise from 108% of GDP in 2025 to 115% by 2031. The Fund also warns against political pressure on central banks to finance deficits or tolerate inflation above targets, emphasizing the critical need to safeguard their independence.