Israel's Central Bank Warns Iran War Requires Cautious Fiscal Management, Deficit Target Raised

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Investing.com – The Bank of Israel issued a statement on Wednesday, commenting on the government’s increased defense spending and higher deficit targets during the ongoing Iran conflict, emphasizing the need for cautious fiscal management.

The central bank stated that the geopolitical environment caused by the Iran war poses downside risks to economic activity, at least in the short term.

The Bank of Israel stressed that it is crucial to avoid budgeting for new projects not related to the war, especially those that do not contribute to long-term growth, and to avoid tax cuts.

The central bank warned that the new deficit target of 5.1% of GDP in 2026 could lead to a debt-to-GDP ratio of 70%.

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