Moody's upgrades growth forecasts for Israel, but warns of risks for the next government

Moody's raised its growth forecast for Israel to 5% in 2026 and 6% in 2027, but warns that the improvement is mainly due to a statistical change in measuring the activity of Israeli companies abroad. The company also improved its deficit and debt forecasts, and notes political and institutional risks for the next government.

Credit rating agency Moody's raised its growth forecasts for Israel's economy to 5% in 2026 (up from 3.7% in the previous forecast) and 6% in 2027 (up from 5%). However, the company emphasizes that much of the improvement stems from a statistical change in how the activity of Israeli companies abroad is measured, against the backdrop of a surge in high-tech exports related to the artificial intelligence revolution. Moody's notes that the rapid growth in this activity distorts the picture of local economic activity. Alongside this, Moody's improved its deficit forecast to 5% of GDP in 2026 (down from 5.9%) and the debt-to-GDP ratio to 68.5% (down from 70.1%). Regarding the election results, Moody's assesses that the identity of the next government will not immediately affect credit quality due to similarities in economic policy, but warns of a weakening of institutional strength, harm to the independence of the judicial system, and deterioration in foreign relations. Moody's did not change Israel's credit rating, which stands at Baa1 with a stable outlook.