Ministry of Finance Chief Economist Dr Shmuel Abramson reduced Israel's 2026 GDP growth forecast from 5.2% to 4.7%, citing economic disruption from the Iran-Israel-US war. 

Abramason cited increased IDF reservist mobilisation and potential global spillover effects from current military operations as key drivers behind the decision.

The Israeli stock market has remained resilient despite the ongoing conflict, with the Tel Aviv Stock Exchange posting gains following the outbreak of the war, with defence companies emerging as notable frontrunners. This was followed by a moderate retreat on March 10.

Still, the country is vulnerable to the effects of international economic concerns, particularly around oil. In order to combat surging oil prices, the International Energy Agency has proposed the largest release of oil reserves in its history.

Abramson explained that the revised forecast assumes fighting in the north and against Iran will last only a few weeks. "If it lasts longer than that, the forecasts will need to be re-examined," he stated, as per Calcalist.

Despite the growth downgrade, Abramson raised the tax revenue forecast from approximately ILS 551bn ($178bn) to ILS 562bn ($181bn), an increase of roughly ILS 11bn ($3.56bn). He attributed the revision to January-February 2026 revenues exceeding trend lines, alongside strength in the stock market and the shekel. However, currency appreciation may actually undermine tax collection, as a stronger shekel increases exporters' expenses, reducing profit margins and their resulting tax obligations.

The revenue revision provides crucial fiscal flexibility, allowing the government to increase defence spending by billions without proportionally expanding the deficit. Without the updated forecast, the government would have been forced to raise the 2026 deficit ceiling by at least another 0.5% of GDP, constraining its capacity to fund military operations whilst maintaining fiscal targets.