EconIsrael Vol. 128

Dear Readers,

Against the backdrop of March data pointing to a wartime hit to economic activity, updated forecasts for the Israeli economy began to emerge this week, offering an early indication of how the economy is expected to perform going forward.

The OECD published its updated outlook for member countries, including Israel. According to the revised forecast, the organization expects Israel’s economy to grow by 3.3% in 2026 and by 5.6% in 2027. This places Israel among the fastest-growing economies in the OECD, ranking second only to India in 2027. The forecast also points to an improvement in the contribution of net exports to growth, from negative 0.7% in 2026 to positive 0.2% in 2027. The OECD also projects inflation of 2.3% in 2026 and 2.1% in 2027. At the same time, the expected unemployment rate remains low and stable at 2.9% in both 2026 and 2027.

In this context, it is also worth noting the forecast of the Chief Economist of the State of Israel, which was updated this week in the quarterly report to the government. According to the outlook, Israel’s economy is expected to grow by 4% in 2026, up from 3.5% in the previous forecast. Government revenues are also projected to increase by approximately NIS 17 billion this year compared with the forecast at the time the budget was approved.

A new CBS survey found that 63% of businesses using artificial intelligence now apply it to managerial and strategic processes, a significant increase from the previous year. AI use is also expanding across other activities, including marketing (46%), production of final goods and services (35%), and R&D (35%). In the high-tech sector, 73% of businesses use AI for R&D.

International trade in services also showed improvement. Following a decline in the previous month, total services exports rose by 3% in March 2026, while services exports from high-tech industries increased at a sharper rate of 5.8%.

In the high-tech sector, another notable deal between an Israeli company and an American company was announced this week, as Motorola Solutions revealed its acquisition of Israel’s D-Fend Solutions, which develops counter-drone systems based on remote takeover through radio frequency technology. The value of the acquisition stands at $1.5 billion.

According to data published by Israel’s Ministry of Defense, Israeli defense exports continued to break records in 2025, reaching $19.2 billion. This marks a new all-time high and an impressive 30% increase compared with the previous record set in 2024.

I will conclude with an important event that took place this week at the Embassy of Israel, where, for the first time, Israel’s Minister of Finance and the President of the Inter-American Development Bank (IDB) signed a letter of intent to establish a dedicated fund under the Isaac Accords and strengthen ties between Israel and Latin American and caribbean countries. The fund will support development projects in Latin America through joint financing from the Bank, the State of Israel, and the private sector.

Stay informed and stand with Israel,

Noach Hacker