The IMF recommended that the Israeli government increase taxes

The International Monetary Fund published a preliminary report on Israel’s economy, noting its resilience and warning of insufficient government action.

IMF analysts are more pessimistic than the Bank of Israel and the Finance Ministry, forecasting 4.8% GDP growth in 2026 instead of 5.2%, and 3.5% in 2027 instead of 4.3%.

The reasons for the pessimism are high security costs in the coming years, the continued mobilization of reservists, increased risk premiums and a decline in the employment of non-Israeli workers.

The fund’s economists have expressed concern about the government’s fiscal policy, recommending accelerating the rate of reduction of public debt to 60% of GDP by 2029, rather than by the mid-2030s, as the Ministry of Finance predicts.

To achieve this, the fund proposes to increase the minimum level of income tax from 10% to 14%, increase VAT, expand taxation of polluting structures and reduce tax benefits. At the same time, the IMF opposes a tax on bank excess profits, arguing that it “could damage investor confidence.”