Moody’s has raised its growth forecasts for the Israeli economy, but cautions that the stronger headline figures overstate the health of domestic activity.
Israel’s growth: strong on paper, weaker at home © Mena Today
Moody’s has raised its growth forecasts for the Israeli economy, but cautions that the stronger headline figures overstate the health of domestic activity.
In a report published after the Knesset election, the rating agency attributes much of the upgrade to a change in how the overseas activity of Israeli companies is measured.
The agency now expects GDP to expand by 5% in 2026, up from 3.7% previously, and by 6% in 2027, compared with an earlier forecast of 5%.
According to Moody’s, the revision mainly reflects adjustments by the Central Bureau of Statistics to better capture the contribution of Israeli firms’ production abroad to GDP. That activity has surged on the back of booming high-tech exports linked to the artificial intelligence revolution.
The gap between headline and domestic growth is striking in the Bank of Israel’s own projections, which Moody’s cites. The central bank forecasts growth of 5.6% this year and 7.5% next year. Strip out overseas production, and those figures fall to 3.4% and 5.1% respectively.
In other words, the rapid expansion of offshore activity is inflating the numbers without signalling a matching improvement in the domestic economy.
The report comes at a delicate moment. Last week’s inconclusive election has raised fears of prolonged political paralysis, threatening the passage of a state budget and delaying post-war infrastructure investment.
The Tel Aviv Stock Exchange and the shekel both fell sharply as investors priced in the risk of a protracted deadlock.
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