In a session of the Knesset Finance Committee today, Ministry of Finance officials estimated that the cost of the war in the Gaza Strip would total NIS 191 billion. This compares with an estimate of NIS 163 billion by the Bank of Israel a week ago, which chiefly shows how great the uncertainty is at present.
Officials from the Ministry of Finance Budgets Division put the required addition to the budget at NIS 26 billion, and estimated that the fiscal deficit for 2023, as a proportion of GDP, would be 3.7%. The original estimate in the 2023 budget was 1.1%.
The officials said that tax receipts were declining even before the war, "and even if war had not broken out, we would have lowered the revenues forecast for 2023, because of the fall in revenues from the high-tech sector, caused by both internal and external factors, and the slowdown in the construction industry."
Now, with the impact of the war on private consumption, inward investment, tourism, and so on, the chief economist at the Ministry of Finance estimates that the revenue shortfall will be NIS 12 billion, up from NIS 10 billion in the previous forecast.
The Ministry of Finance representatives in the session pointed out that the economy had recovered very quickly from previous events, and that growth rates were still high. They added, however, that this event was of a different scale, and that only limited reliance could be placed on past experience.
Central Bureau of Statistics figures show that about 750,000 Israelis are absent from the workforce because of the war(18% of the workforce), including those on unpaid leave and those on reserve military duty. Israel Employment Service indicate that in the past few days the rate at which people have been registering as on unpaid leave has moderated.
In the chief economist’s main forecast, which assumes a reduced level of fighting until the end of 2024, economic growth will fall to 2% in 2023 and to 1.6% in 2024.
Published by Globes, Israel business news - en.globes.co.il - on December 4, 2023.
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