Recent Developments and Outlook: Growth remained strong in 2025, supported by robust domestic demand and services exports. Inflation fell last year, reflecting favorable supply-side developments. But following the war in the Middle East, inflation has rebounded on higher energy prices; activity is expected to moderate. Since labor market tightness limits further gains from employment, sustaining longer-term growth will depend on investment and productivity enhancing reforms—especially improving judicial efficiency, strengthening skills and digital/AI readiness, and advancing energysector reforms and infrastructure.
International Monetary Fund. European Dept. (Mon,) studied this question.