In its annual review of Israel's economy, the IMF said 2010 growth was projected at 2.5%, up from 0.1% in 2009.
An IMF staff report cautioned, however, that Israel's economy was not yet out of the woods and the outlook depended on a recovery in output in the world's major economies.
The IMF welcomed moves by the central bank to begin withdrawing "unconventional" monetary policy measures, including pre-programmed foreign exchange interventions, and to raise interest rates as the impact of the crisis eases.
The IMF said the move to "discretionary intervention should be formally terminated, for all but the most exceptional market circumstances, once the policy interest rate is well above its effective floor on a sustained basis."
The IMF said, however, that public debt in Israel was high and expected to rise in the near-term before declining, while upward pressure on Israel's shekel currency could pose new risks for the economy. IMF estimates put the value of the currency "on the strong side."
The Fund urged the authorities to introduce changes to fiscal rules that set explicit medium-term debt targets. It also said 2010 public sector wage settlements should "be tightly restrained."
"High Israeli public debt represents an enduring vulnerability," the IMF staff report said.