The global credit rating agency S&P (Standard and Poor’s) reported it expects that economic growth in Israel will only be 1.5% in 2023 and only 0.5% in 2024. This not so rosy prediction clearly came as a result of the ongoing Iron Swords war in Gaza. The war is costing Israel’s economy billions, from the virtual end of tourism to the loss of revenue from many businesses, such as in the entertainment field, that have been shuttered, and the tens of thousands of Israelis who have been forced to leave their jobs and answer call ups for military reserve duty.
S&P also predicted that the country will have an average deficit of 5.3 % of GDP in 2023 and 2024. This is way higher than the 2.3% the firm predicted before the war in Gaza began.
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The announcement came about three weeks after S&P lowered Israel’s credit outlook from stable to negative.
But S&P’s outlook is still a lot better than that of JPMorgan Chase. Two weeks ago JPMorgan lowered Israel’s 2023 fourth quarter GDP forecast, reporting that it expects the country’s economy to contract during that period by 11%. The bank previously predicted a contraction of just 1.5%.
Also two weeks ago, Moody’s Investors Service (Moody’s) – the internationally renowned credit ratings agency – predicted that the inflation rate in Israel will go up to as much as 6.8% in 2024. And Moody’ also predicted that Israel will see a growth in GDP of just 1.4%.
Moreover, Moody’s also predicted that Israel’s fiscal deficit could reach 3.5% of GDP by the end of this year. And in even worse news, the firm sees it possibly hitting 7.8% of GDP in 2024.
S&P further predicted that Israel’s GDP in the fourth quarter of 2023 will shrink by 5% due to the Iron Swords war.
On the bright side, S&P said that because Israel had a moderate government debt-to-GDP ratio estimated at about 60% of GDP at the end of 2022 the country will have budgetary flexibility to deal with economic problems in the short term. Also, Israel’s current debt is mostly held in Israeli currency by people in the country, which makes dealing with debt easier since the country does not need to buy more foreign currencies to finance it.
