Monetary Fund: Uncertainty surrounding the legal reform constitutes a negative risk to the economy

"The ongoing uncertainty surrounding the legal reform constitutes a significant negative risk to Israel's economy." This is what the report of the International Monetary Fund claims. According to the organization's economists, in the case of a pessimistic scenario surrounding the reform, growth per capita is expected to be reduced to only 1.5%-1.6% in the next two years (2023-2024), which reflects negative economic growth per capita (the natural increase in Israel stands at 2%).
According to the report, "Protests and social conflicts have accompanied the economic uncertainty, which, if it continues, may take a heavy toll on the economy, adversely affecting consumption and investments. Among the specific channels through which the investment may be affected, one can mention the relocation of high-tech companies outside of Israel. If a large enough number of companies in this sector relocate, Israel's strong economic growth potential may be at risk."
The IMF cites the Bank of Israel's risk analysis and explains that the reform may result in "an increase in the risk premium in the country, characterized by an increase in the yield gap between Israeli government dollar bonds compared to US bonds, the weakening of the shekel and the underperformance of the local stock market relative to the United States." in and Europe". The IMF emphasizes that "many of these developments are already taking place and if they continue, these events will cause investors to demand a higher premium to own Israeli assets. Increasing the risk premium will increase the financing costs of the economy. This will be reflected in a reduction in the amount of capital in the economy, a further devaluation of the shekel and an acceleration of Inflation and a decrease in growth in real investments which will reduce the capital stock in the economy and therefore the level of Israel's GDP." The IMF's warnings and the language they use is more unusual and harsh than in any other report.