The Organisation for Economic Co-operation and Development (OECD) expects Israel’s economy to rebound in 2025 and is more optimistic about the pace of growth than local projections, but warns that the outlook is vulnerable to any renewed warfare and is dependent on responsible fiscal policy.

In a report published on Tuesday, the OECD said that it projects growth to pick up following the release of the hostages and the ceasefire agreement signed in October, which put an end to the two-year fighting with the Hamas terror group in Gaza.

The  OECD forecasts that the country’s economy will grow at a rate of 3.3 percent in 2025 and 4.9% in 2026, which is faster than the Paris-based organization’s average growth outlook for the global economy of 3.2% in 2025 and 2.9% in 2026. The Bank of Israel’s projection is for the local economy to expand at a slower pace of 2.5% in 2025 and 4.7% in 2026. The Finance Ministry’s forecast is 2.8% in 2025.

“The private sector will lead the economic expansion as military expenditure contracts,” the OECD said in the report. “Investment will be strong given the backlog accumulated during the war [and] improved household confidence amid more peaceful conditions will support private consumption.”

The wars with Hamas and the Iran-backed Hezbollah terror group in Lebanon ballooned government spending on military and civilian needs and took a toll on the country’s exports and investments. Israel’s economy grew by around 1% in 2024, down from 1.8% in 2023 and 6.3% in........

© The Times of Israel