Ministry of Finance chief economist Dr. Shmuel Abramzon sees Israel's economy growing by 1.6% in 2024, negative GDP growth in per capita terms, in his basic scenario assessment. The basic assessment sees the war lasting five months with the fighting in Gaza and limited hostilities in the north, and ending by February 2024.
In a more pessimistic scenario, with the war continuing until the end of 2024, then GDP would shrink by 1.5%, the chief economist writes in his report. Before the war broke out in October, Abramzon forecast 2.7% GDP growth in 2024.
The report forecasts a decrease of NIS 33 billion is in state tax revenues in 2024 during the coming year. He compares this to the forecast of the chief economist's office in May 2023 (then still headed by Shira Greenberg). According to the data, a deficit of NIS 52 billion is expected in the state coffers due to the decrease in revenues alone.
Abramzon also presented the cabinet with economic data, showing that the volume of purchases by Israelis with credit cards has fallen sharply in recent months compared with the third quarter of 2023. However, the volume of purchases is recovering and has returned to the average of purchases in the third quarter, but the gap that has been created already stands at about NIS 8 billion in cumulative loss. At the same time, other markets also demonstrate economic recovery with an emphasis on the shekel exchange rate and the Tel Aviv Stock Exchange.
On the state budget, Abramzon pointed out that the planned fiscal deficit of 6.6% in 2024 would be the highest of any country except the US. The average fiscal deficit of western developed economies in 2024 will be just 1.3%.
The chief economist quotes international bodies that stress the importance of fiscal responsibility and quotes an IMF document given to Minister of Finance Bezalel Smotrich at the end of October. "Reallocating spending will send a clear message to the markets on the unquestionable commitment of the Israeli authorities on maintaining macroeconomic stability and fiscal responsibility."
Published by Globes, Israel business news - en.globes.co.il - on January 16, 2024.
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