International Monetary Fund updates the Israeli GDP growth forecast downwards - to 1.6%

The International Monetary Fund updates the Israeli GDP growth forecast downwards - to 1.6%. This is the first official forecast of the fund after the outbreak of the war when the forecast on the eve of the war was for growth of 3.1% in 2024. The update of the forecast is in line with the view of the Ministry of Finance which was the basis of the construction of the updated budget for 2024.
However, the Bank of Israel still estimates that growth in 2024 will be higher and stand at 2%. Regarding the year 2025 - the International Monetary Fund believes that in 2025 Israel will grow by 5.4%, compared to a 5.6% growth forecast by the Ministry of Finance, and compared to a 5% forecast by the Bank of Israel. The fund predicts that at the end of 2024, Israel will record inflation of 2.4%, this is a lower estimate than that of the research division of the Bank of Israel which estimates that the year will end with 2.7% inflation.
The forecasts of the Treasury and the Bank of Israel are optimistic forecasts that do not foresee the development of an all-out war in the north. The Ministry of Finance estimated that in the case of a "severe scenario", which would include a wide mobilization of reserves and a shutdown of the education system and damage to infrastructure, growth in 2024 would be negative and stand at 1.5%. The IMF also emphasizes that its forecast regarding growth in Israel "is subject to increased uncertainty due to the Israel-Gaza conflict and therefore may undergo revisions."
Regarding the global economy as a whole, the IMF estimates that it will grow by 3.2% in both 2024 and 2025. This is a positive update of 0.1% compared to the last publication in January 2024 and of 0.3% compared to the full publication in October 2023. The title of the review of the International Monetary Fund It is "stable but slow", this title reflects the general thesis of the review that the world economy has been surprisingly resistant to the sharp interest rate hikes. This surprise is explained both by the high savings accumulated by households during the Corona period and by changes in the structure of mortgages and the housing market in the decade before the Corona. On the other hand, it is estimated that we are moving towards years of slower growth. The war of iron swords is mentioned in the report as a risk factor for inflation, along with the war in Ukraine. However, the report notes that at the global level, positive and negative risks balance each other.