Jerusalem, 22 October, 2026 (TPS-IL) — The Bank of Israel expects the economy to grow by 5.6% in 2026 and 7.5% in 2027, according to its updated economic forecast. The central bank also kept its benchmark interest rate at 3.25%. The forecast points to strong economic growth, although part of the projected expansion is attributed to overseas production by multinational technology companies rather than economic activity taking place within Israel.
For the first time, the Bank of Israel has separately accounted for the impact of overseas production by multinational companies such as Nvidia. Excluding this activity, the economy is projected to grow by 3.4% in 2026 and 5.1% in 2027. The figures highlight the distinction between Israel’s headline gross domestic product (GDP) growth and the economic activity taking place within the country.
The central bank’s decision to hold interest rates followed three consecutive rate cuts. Before the announcement, the shekel had weakened by 3.1% against the US dollar. A weaker shekel can raise the cost of imported goods, commodities and energy, putting upward pressure on prices.
Maintaining the benchmark interest rate at 3.25% is intended to help support the shekel and keep inflation within the central bank’s target range. The Bank of Israel forecasts inflation of 1.5% by the end of 2026, rising to 2.1% in 2027.
Other economic indicators remain relatively strong. Unemployment is projected to remain at around 3%, indicating a tight labor market. Public debt is forecast to reach 70% of GDP by the end of 2026 and 70.5% in 2027.
The forecast is based on assumptions about the security situation, including relatively limited geopolitical tensions and fighting. A deterioration in the security situation could affect the economic outlook.
