Organisation for Economic Co-operation and Development urges Israel to contain fiscal deficits and pursue pro-competition reforms in Economic Survey

The Organisation for Economic Co-operation and Development published its latest Economic Survey of Israel, finding the economy has remained resilient after the 7 October attacks and subsequent conflicts and calling for policies that curb inflation, contain fiscal deficits and address the high cost of living while sustaining growth. GDP growth is projected to rise to 3.4% in 2025 and 5.5% in 2026. With headline and core inflation still slightly above the Bank of Israel’s 1–3% target range, the Survey argues monetary policy should remain tight. It also points to a deterioration in the fiscal balance due to higher conflict-related spending and recommends maintaining fiscal discipline, raising revenue through the least distortionary taxes and using spending reviews to prioritise expenditure. On structural reforms, it calls for reducing barriers to domestic and foreign trade by cutting red tape and easing border processes, lowering product market regulation to facilitate entry and competition, negotiating new and deepening existing free trade agreements and continuing to remove technical barriers to trade; it also recommends diminishing state involvement in the economy. The Survey additionally highlights maintaining a flexible regulatory approach to support growth in the artificial intelligence sector, conditioning school funding on teaching the core curriculum and improving work incentives, and using the newly introduced carbon tax as a basis for decarbonisation, including by increasing the carbon tax rate on natural gas to accelerate the decarbonisation of power generation.