According to the agency, the administration of Israeli Prime Minister Benjamin Netanyahu has halted discussions on next year’s budget, which could be the most challenging and important in decades, noting that although Netanyahu and Finance Minister Bezalel Smotrich confirmed that there would be a financial framework for the 2025 budget, they did not provide any explanations for the delay in formulating this framework.
This uncertainty has markets and investors worried about the possibility of formulating the framework, at a time when the budget deficit and debt are widening due to the war. Budgeting usually begins at this time of year under normal circumstances.
Senior officials at the Central Bank and the Finance Ministry repeated the same warning issued by credit rating agencies and business leaders that halting the budget discussion would negatively affect the Israeli economy and increase risks.
GDP grew by just 2% last year, roughly half the rate the Treasury had forecast before the war, and JPMorgan Chase expects it to grow by just 1.4% this year after cutting its forecast twice in the past two weeks.
According to the agency, there is increasing concern about the state of the Israeli economy and the government’s management of financial affairs, in addition to the risks of escalating the conflict, which casts a shadow over the financial markets.
Days ago, Fitch downgraded Israel’s credit rating from “A+” to “A,” citing the worsening geopolitical risks as the war in Gaza continues.
Israel has spent 88 billion shekels (about $24 billion) on the war so far, roughly 5% of gross domestic product, and raised more than 190 billion shekels through July to help fund the military and plug the fiscal deficit. If the trend continues, this year’s borrowing will break the record set during the coronavirus pandemic in 2020, according to Bloomberg.
The deficit rose to 8.1% of GDP in the 12 months through July. The Finance Ministry and Central Bank expect it to be around 6.6% for the year as a whole, assuming the conflict with Hezbollah and Iran does not escalate.
Source: Bloomberg
#Bloomberg #Israeli #economy #hurts #budget #approval #stalls #due #war
2024-08-27 12:27:00
