The Ministry of Finance is shortly due to release a further update to its macro-economic forecast, the third within three months, as it assesses the impact of Operation Roaring Lion in Iran on the Israeli economy. Sources inform "Globes" that, unlike the previous updates, which lowered the growth forecast, this time the revision is essentially optimistic. The growth forecast for 2026 will rise slightly, and the tax receipts forecast will increase by NIS 5-10 billion. The forecast from Ministry of Finance chief economist Shmuel Abramzon will be distributed along with an updated numerator (the limit on planned government spending) from the ministry’s Budgets Division reflecting the state’s expected revenues.

According to estimates that have reached "Globes", Israel’s economy is now expected to grow by 4% this year. The forecast published at the end of March, at the height of the military operation, presented three scenarios, projecting growth ranging between 3.3% and 3.8%, depending on the duration of hostilities with Iran and Lebanon.

Those projections replaced the 4.7% growth forecast formulated at the beginning of the fighting, which itself cut the original 5.2% growth forecast issued before it started. In other words, even after the current positive revision, the economy is expected to grow by significantly less than was projected before the latest round of fighting with Iran and Hezbollah.

The explanation for the improvement lies in the fact that the economic damage from the hostilities has turned out to be less severe than expected. The Ministry of Finance had expected a sharp quarterly decline in GDP, as happened last year as a result of Operation Rising Lion against Iran, but in fact the decline was only an annualized 3.3%, testimony to the resilience of the Israeli economy.

Higher tax revenues

At the same time, state tax revenues continue to be surprisingly high, and the forecast for 2026 is expected to rise by up to NIS 10 billion. The strong tax collection figures are partly explained by very high levels of activity on the capital market, yielding large sums from capital gains tax.

As on previous occasions, the higher forecast is based on higher than expected revenue already received. This time, however, the Chief Economist’s Department tends to view the figures as representing a permanent trend and not just a one-time spike in state revenues, a view that is expected to lead to higher revenue estimates for 2027 and 2028.

The forecast is mainly based on tax collection figures for April, which were surprisingly good. The fiscal deficit for the twelve months to the end of April fell to 3.8% of GDP, the lowest since November 2023, and tax collection for 2026 to date reached NIS 205 billion, 11.8% more than in the corresponding period of 2025.

Published by Globes, Israel business news - en.globes.co.il - on June 1, 2026.

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