Israel's Finance Ministry has lowered its economic growth forecast for 2026, citing the impact of the ongoing war with Iran and Hezbollah. The economy is now projected to grow by 4.7 percent, down from a previous estimate of 5.2 percent, based on the assumption that the fighting will last only a few weeks.

The revised outlook reflects disruptions caused by large-scale reserve duty call-ups, temporary business closures and a short-term decline in private consumption. Increased geopolitical uncertainty has also weighed on investment and foreign trade. The ministry warned that a longer or expanding conflict could lead to further revisions.

Despite the downgrade in growth expectations, the ministry raised its forecast for government revenue. State revenues are now projected to reach 586.3 billion shekels in 2026, supported by stronger-than-expected tax collections earlier in the year and solid capital market performance.

The updated projections were prepared as part of revisions to the 2026 state budget and were informed by recent economic data and comparisons with previous security crises.