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Investing.com -- The Organization for Economic Cooperation and Development (OECD) predicts a rebound in Israel’s economy over the next two years, provided geopolitical tensions ease.
The OECD report, presented on Wednesday, however, emphasizes the need for structural reforms to sustain long-term growth and support government finances.
Israel’s economy, impacted by the country’s conflicts with Palestinian militant group Hamas in Gaza and Hezbollah in Lebanon, grew by a mere 0.9% in 2024. These conflicts were triggered by Hamas’ cross-border attack on October 7, 2023.
The OECD report forecasts an economic growth of 3.4% in 2025 and 5.5% in 2026 in Israel, attributing the potential growth to an expected end to military conflicts, which would boost high-tech exports, consumer spending, and investment.
OECD Secretary General Mathias Cormann presented the biennial survey at a session of Israel’s Social-Economic Cabinet chaired by Finance Minister Bezalel Smotrich.
The report also commented on inflation in the country, stating it is projected to reach 3.7% this year, above the annual target of 1-3%. The inflation rate is partly fueled by supply shocks. The OECD expects the inflation rate to drop to 2.9% in 2026.
In response to the inflation projections, the OECD recommended the Bank of Israel maintain its current interest rates until price pressures are effectively managed.
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