IMF says Israeli economy to rebound from Gaza war with 4.8% growth in 2026

Israel's economy is expected to grow 4.8% in 2026 following a ceasefire in Gaza, after a 2.9% rate in 2025, but renewed regional tensions could limit growth, the International Monetary Fund said in a report on Thursday.

The IMF said that following the ceasefire in October, economic activity had accelerated markedly and, assuming no renewed hostilities, growth was projected to strengthen in the near term, driven by "pent-up private consumption and a rebound in investment, while government consumption declines".

It noted that the two-year conflict with Palestinian militant group Hamas left a substantial legacy of high defense spending, while labour supply was constrained by extended military mobilisation and reduced availability of non-Israeli workers.

"These pressures would compound longstanding structural challenges — such as persistently low labour market participation among specific groups — and weigh on the medium-term economic outlook," the IMF said, referring to ultra-Orthodox Jewish men and Arab women.

Reuters