The Chief economist in Israel’s Ministry of Finance Shmuel Abramson predicted the Iron Swords war in Gaza will cause a reduction of 1.4% in Israel’s GDP growth for the year 2023, or just 2% in total. While this would, technically, not constitute a recession it would still mean a slowdown in Israel’s economy.
“Given the high degree of uncertainty in connection with the situation in the fighting, several scenarios have been prepared,” Shmuel Abramson said.
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The war is obviously causing major disruptions to Israel’s economy. Foreign airlines cancelled all flights to the country and tourism, a major part of Israel’s economy, has dried up. Also, several hundred thousand Israelis are away from their jobs performing reserve duty in the IDF.
Small businesses, especially in the entertainment sector, are also hurting as Israelis are only now slowly returning to their usual nightlife routines. And the country’s agricultural sector has been deviated too because of all of the farms located near Gaza and the border of Lebanon in areas that needed to be evacuated.
But the Chief Economist’s prediction for 2023 is rosier than others’. The global credit rating agency S&P (Standard and Poor’s) reported a few weeks ago that it expects economic growth in Israel will only be 1.5% in 2023 and only 0.5% in 2024.
Moody’s Investors Service (Moody’s) – the internationally renowned credit ratings agency – predicted Israel will see a growth in GDP of just 1.4%. And Moody’s also that the inflation rate in Israel will go up to as much as 6.8% in 2024.
J.P. Morgan, the world’s largest investment bank, also had some grim predictions for Israel’s economy in the near future. The bank expects Israel will see a budget deficit of about 4.5% of GDP in both 2023 and 2024. J.P. Morgan also expressed concerns about what would happen should the war continue into 2024.
The one thing that all of the experts seem to agree on is that the sooner the war in Gaza ends, the better it will be for Israel’s economy.
“Victory in the war is important for the recovery of the economy as well,” Shmuel Abramson declard.
