The Bank of Israel on Monday trimmed its growth outlook for the economy for this year and left interest rates on hold for a second straight meeting, citing high geopolitical uncertainty over the duration and toll of the war with Iran.

“Recent weeks, since the beginning of Operation Roaring Lion, have been marked by considerable geopolitical uncertainty, and the war’s impacts on the economy and on real activity can be seen across all industries,” Bank of Israel Governor Amir Yaron said at a press conference in Jerusalem.

“On the demand side, there is a decline in credit card expenditures and in tourism, and on the supply side, there is an adverse impact on labor supply due to employee absences and military reserves call-ups, alongside disruptions in the supply chains,” he said.

“However, even at this challenging time, the economy continues to show resilience, flexibility, and robustness, as has been the case for the past two and a half years as well,” Yaron noted.

Assuming that the war with Iran and the fighting in Lebanon will end in late April, the central bank said it expects the economy to grow by 3.8 percent in 2026, down from its January forecast of 5.2%, before the outbreak of the war.

Also on Monday, the Finance Ministry said it forecast the economy to expand at a slower pace of 3.3%-3.8% in 2026, depending on the duration of the wars on multiple fronts. Earlier this month, the ministry lowered its 2026 growth forecast from 5.2% to 4.8%, assuming that the war with Iran would be short-lived, a prediction that did not materialize.

“Insofar as the fighting continues, economic activity is being negatively affected........

© The Times of Israel