The Ministry of Finance in Israel said during its report, on Tuesday, October 29: “This perception is no longer appropriate, after the expansion of the fighting to extend to the northern arena in late last September.”
The ministry stated that the escalation of the military conflict with the Lebanese “Hezbollah” over the past month led to the devouring of about 14 billion shekels ($3.75 billion) from Israel’s economy, according to Reuters.
The geopolitical situation changed significantly, following previous Israeli estimates of economic growth, issued during September, with the decline in the intensity of fighting against the Hamas movement in the Gaza Strip and its escalation in Lebanon with more air strikes and an Israeli ground incursion into the southern Lebanese border.
The Israeli Ministry of Finance said that these developments required the call-up of a large number of reserve soldiers in the Israeli army, and Israeli citizens were transferred to shelters due to the launching of rockets from Hezbollah, which caused damage to the economy by up to 0.7%, or about 14 billion shekels. .
The ministry’s latest forecasts indicated that the most severe phase of the fighting would end during the year 2024, after previous estimates that the violent fighting would continue into the first quarter of next year.
The Israeli Ministry also reduced its expectations for economic growth in 2025 to 4.3% as the economy begins to recover, compared to previous expectations of 4.6% economic growth for next year.
It also revealed the worst scenario for the Israeli economy if the fighting continues until 2025 and the economy’s return to normal is delayed. In this case, it expects economic growth this year to record 0.2%, and 3.4% in the next year.
The Ministry of Finance’s new forecasts come after the Central Bank of Israel reduced earlier this October its expectations for economic growth during the year 2024 to 0.5% from 1.5% previously, expecting the growth rate in the following year to reach 3.8%.
Israel’s per capita economy is likely to contract in 2024, with the population growing by at least 1.6% annually.
The Israeli economy recorded a growth of 0.3% during the second quarter of this year, but policymakers at the Central Bank do not intend to reduce interest rates, but rather indicated the possibility of raising them if inflation continues to rise.
Source: CNBC
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