Moody's has issued a harsh forecast for the Israeli economy. The ratings agency sees inflation jumping to 6.8% in Israel in 2024 with GDP growth of just 1.4%. The forecast is very different from the predictions issued by the Bank of Israel last week, when it announced that the interest rate would remain unchanged at 4.75%. The Bank of Israel predicted 2.5% inflation next year and 2.8% GDP growth.
Moody's issued its forecast to investors last Tuesday, a day after the publication of the forecast by the Bank of Israel's research division. Last week Moody's also announced that it was putting Israel's credit rating on review for a negative downgrade, due to the war. Fitch has made a similar move, while S&P announced that it was cutting Israel's rating outlook from positive to negative.
Moody's forecast for Israel's economy in the shadow of the war looks particularly gloomy. Moody's warns against the increasing risks from the geopolitical defense crisis and polarization of Israeli society. The company positively presented Israel's solid economic situation before the war, but it seems that the risks now outweigh the strengths.
According to Moody's forecast, due to the big jump in inflation, the decrease in GDP and the huge spending on the defense budget, etc. following the war, Israel's fiscal deficit could widen to 3.5% of GDP by the end of 2023, and to 7.8% in 2024. In contrast, the Bank of Israel estimates that the fiscal deficit will be 2.3% of GDP this year and just 3.5% next year.
Published by Globes, Israel business news - en.globes.co.il - on October 30, 2023.
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