Citibank Lowers Growth Forecast for Israel's Economy Amidst Political Uncertainty


by Ifi Reporter Category:Capital Market Aug 3, 2023

Citibank Lowers Growth Forecast for Israel's Economy Amidst Political Uncertainty. In a recent report, American bank Citibank revised its growth forecast for the Israeli economy for 2023 and 2024, attributing the downturn to a drop in investments following a planned coup d'état of the government.

Economist Michel Ni from Citi lowered the growth forecast for the current year to 3.1%, down from the previous projection of 3.3%, and for next year to 2.8%, compared to the previous estimate of 3.3%. However, he predicts a rebound in 2025 with growth expected to reach 3.2%.

Ni noted that the immediate impact on GDP is likely to be moderate, but the loss in production will be felt more severely in the medium term. Despite this, he believes that private consumption may not be significantly affected due to stable income growth.

In contrast, the Bank of Israel remains slightly more optimistic, forecasting a growth rate of 3% for both 2023 and 2024. However, the S&P credit rating agency predicts a more pessimistic scenario, anticipating a slowdown to 1.5% growth in 2023 after an impressive 6.5% growth in 2022.

Looking beyond 2025, Ni has lowered Israel's GDP growth forecast from 4% to 3.4%, citing concerns about the impact of government policies on the economy. He believes that the government's response to demographic challenges and other policy decisions, such as budget allocation and education policy, could significantly influence the country's potential growth and impact various aspects of the state and economy.

Moody's rating agency has also expressed apprehensions about the effects of the political situation on Israel's economy. They warned that some of these concerns are beginning to materialize, indicating growing uncertainty and risks to the country's economic stability.

The situation in Israel remains fluid, and the actual impact on the economy will depend on how the government navigates through the challenges and implements its policies. As economists closely monitor the unfolding events, further adjustments to growth forecasts are not ruled out, potentially leading to a continued period of economic uncertainty in the country.



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