Bank of America sees strong GDP growth of 4.2% in Israel in 2026 followed by 4% in 2027. Their analysts expect the interest rate in Israel to fall from 4.25% to 3.25% in 2026 and remain unchanged in 2027.
Bank of America observes that the most likely scenario is to maintain the status quo of "no war - no peace," with a continued risk of disruptions to shipping in the Red Sea. However, the bank’s analysts note that tensions between Israel and Iran may resurface, but with lower intensity than the most recent war, and that tension levels may also increase in relation to Lebanon and Gaza.
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Among the risks to the Israeli economy, Bank of America mentions geopolitical events and a deterioration in the security situation, as well as a slowdown in the economy and instability in the financial sector. On the other hand, the bank’s analysts estimate that a scenario of reduced geopolitical tensions could contribute to the decline in risk.
In light of the forecast, the bank maintains an Overweight rating on Israel, given, "attractive pricing and a solid fiscal outlook." The bank also mentions that the debt level has declined since the global financial crisis, but this figure has recently increased. Bank of Israel says that although geopolitical risk remains high, the strong surplus in the Bank of Israel's current account, alongside growth supported by low interest rates and a healthy private sector balance sheet, support their rating.
Published by Globes, Israel business news - en.globes.co.il - on December 4, 2025.
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