JERUSALEM, July 7 (Xinhua) -- Israel's central bank on Monday downgraded its growth forecast for the country's economy for 2025, citing the impact of the 12-day conflict with Iran in June.
The Bank of Israel has set its gross domestic product (GDP) forecast for 2025 at 3.3 percent, down from 3.5 percent in its previous forecast in April.
The bank assessed that the direct economic impact of the Israel-Iran conflict was limited to the immediate downturn experienced during the conflict itself.
However, it added that depending on geopolitical developments, there could be long-term effects on the Israeli economy.
These may include changes in the risk premium, shifts in investment levels, reduced demand for Israeli exports, slower potential growth, and other impacts, according to the bank.
The baseline scenario of the forecast assumes that a ceasefire agreement will be reached in Gaza soon and that no further intense fighting will follow.
Along with the assessment that fighting with Iran will not resume, the bank set the growth forecast for the Israeli economy for 2026 at 4.6 percent, compared to 4 percent in the previous forecast in April.
The bank also forecasts that annual inflation, which stood at 3.1 percent at the end of May, will decrease to the government's target range of 1 to 3 percent by the end of 2025.
However, the bank decided to leave the benchmark interest rate at 4.5 percent, unchanged since January 2024, as inflation is still above the upper limit of the target.
According to the bank, the interest rate is expected to average 3.75 percent in the second quarter of 2026.
