The global credit rating agency S&P (Standard and Poor’s) reported that it expects the Israeli economy to see a slow recovery. This would be even after the war against Hamas comes to an end.
In its report, S&P pointed to an estimate of Israel’s first-quarter GDP released by the country’s Central Bureau of Statistics (CBS) on May 16 it said was “broadly in line with our latest economic projection. We maintain our below-consensus forecast that Israel’s real economic growth will be 0.5% in full-year 2024, accelerating to 5.0% in 2025 as the geopolitical situation stabilizes and exports and investment activities recover.”
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“We expect the initial economic rebound in the first quarter will be followed by a more moderate increase through the rest of 2024,” added the firm.
S&P also said that it expects the lingering issues in the impacted tourism, construction, and agriculture sectors, alongside elevated regional security and domestic political uncertainty, will “constrain a faster recovery this year,” and that, more broadly, it considers that risks to Israel’s credit profile “remain elevated,” pointing to potential escalation of the conflict with Iran or Hezbollah in Lebanon.
“We also view the deteriorating relationship between Israel and its closest allies as a risk that could impair Israel’s economic rebound and investor confidence,” S&P also stated.
This news comes as Norway, Ireland and Spain have all announced their plans to recognize Palestine as an independent state and as International Criminal Court prosecutors said they will seek arrest warrants for Israel’s Prime Minister Benjamin Netanyahu and it Defense Minister Yoav Gallant on war crimes charges.
S&P also had a few comments on the domestic front in Israel.
“Domestic consumption increased significantly by 4.6% in the first quarter of 2024, already exceeding the levels of the fourth quarter of 2023,” said the agency. “However, the increase was predominantly driven by higher government spending, with private consumption remaining below pre-war levels in real terms. Exports contracted further by 2.9%, following a sharp decline of 5.9% in the fourth quarter of 2023. This mainly resulted from a continued decline in tourism and a contraction in the export of industrial goods.”
The reported slow recovery could be avoided should the fighting in Gaza not only come to an end, but if afterward, Israel succeeds in returning quickly to the advancements that the country made on the diplomatic front and international business areas just before the October 7 massacre.
It should also be noted that Israel is not the only country to expect a recession and that is also suffering from inflation lately.
