The Israeli economy is taking a hit from the Lebanese quagmire, and the chief economist at the Ministry of Finance, Dr. Shmuel Abramzon, has slashed the 2024 growth forecast to just 0.4%, down from 1.1%. This reduction follows a baseline scenario change and marks a 0.7% decrease compared to the prediction in September and a 1.5% drop from June's 1.9% forecast. According to Abramzon, Israel is looking at negative growth per capita.
For 2025, the growth forecast has also been adjusted downward to 4.3%, assuming a gradual economic recovery next year, which is by no means a definite. Thus, they also ran an alternative scenario, predicting intense fighting until year-end, which would further delay economic recovery. In this case, growth could be just 0.2% in 2024 and 3.4% in 2025.
The Ministry of Finance's forecast is the most pessimistic among major economic bodies. The Bank of Israel foresees 0.5% growth, the IMF projects 0.7%, and the OECD—drawing from a less current May forecast—anticipated 1.9%.
Dr. Ron Tomer, President of the Manufacturers Association, has called this downward revision a wake-up call for the government to revise the budget toward growth. The current budget, he argues, cuts into growth drivers and slashes funds for boosting factory construction, productivity, and infrastructure. These cuts primarily affect northern and southern regions, which need rebuilding post-conflict to create jobs and bring residents back to their homes. Tomer urges the Ministry of Finance to ensure that budgets aimed at economic growth remain intact.
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