Israel bank Governor Yaron asserted that the Israeli economy possesses robust foundations

At the International Monetary Fund's annual research conference, Bank of Israel Governor Yaron delivered an optimistic message about the country's economic strength and resilience in the face of ongoing challenges. Governor Yaron asserted that the Israeli economy possesses robust foundations and has historically demonstrated the ability to recover from difficult times. Despite the prevailing skepticism among economists regarding the pace of recovery, Yaron remained confident in a swift return to prosperity.

Yaron highlighted Israel's responsible fiscal policy, evidenced by a consistent downward trajectory of the debt-to-GDP ratio over the years. He acknowledged the fiscal consequences of the recent conflict, projecting a decrease in GDP growth and an increase in the debt-to-GDP ratio by the end of 2024.

The Governor's optimistic growth forecast of 2.3% this year and 2.8% next year, however, contrasts with the more ambitious initial projections from the Bank of Israel's research division, revealing a potential 1% drop in GDP growth due to the ongoing challenges.

Addressing the economic shocks resulting from the conflict, Yaron emphasized the significant impact on households, workers, and businesses. He underscored the Bank of Israel's commitment to implementing necessary fiscal and monetary policies to mitigate the challenges faced by the economy.

Yaron also stressed the importance of the independence of the Central Bank of Israel, citing recent policy steps as evidence of the bank's autonomy and its ability to ensure financial stability.

Regarding interest rates, Yaron hinted at the Bank of Israel's reluctance to lower them, aligning with efforts in the foreign exchange market to moderate currency fluctuations. He highlighted measures taken vis-a-vis the banking sector to provide targeted monetary relief without compromising financial market stability.

Governor Yaron reiterated the call for government support, urging budgetary diversions to finance the costs of the war. He emphasized finding a responsible balance between supporting the economy and maintaining fiscal prudence in the face of increased overall fiscal needs.

The Governor's positive outlook in the midst of economic challenges reflects confidence in Israel's ability to overcome adversity and return to its economic potential.