Chief Economist: Israeli Economy Faces Unprecedented Challenges Amidst Ongoing Conflict

 Chief Economist at the Ministry of Finance, Shmuel Abramson, delivered a sobering update on Israel's economic outlook for the years 2023 and 2024 in the wake of the ongoing conflict. Abramson emphasized that the economic repercussions of the war extend beyond any security incident experienced by the nation in the last two decades.

Revised Growth Projections

Abramson's revised forecasts indicate a significant impact on Israel's Gross Domestic Product (GDP). For 2023, the GDP growth is now expected to be 2%, down from the previously forecasted 2.7% in June 2023. Notably, this translates to zero growth per capita due to a parallel population growth rate of 2%. The estimated loss to GDP thus far is a staggering NIS 24 billion.

Looking ahead to 2024, three growth scenarios were presented, each contingent on the evolving situation on the ground:

Base Scenario (1.6% Growth): Assumes the end of the intensive phase of fighting in Q1 2024, with a continuation of routine fighting until the year's end. A near full economic recovery is anticipated by Q1 2025.

Fast Recovery Scenario (2.2% Growth): Envisages a clear and complete end to fighting by Q1 2024, resulting in near full economic recovery by Q4 2024.

Slow Recovery Scenario (0.2% Growth): Anticipates an end to fighting by Q1 2024 but expects routine war activities to persist until mid-2024, resulting in minimal growth.

Impact on Pre-War Growth Projections

Abramson highlighted that, without the war, the Treasury's initial estimates for 2023 projected an upward revision to 3.4% growth. Therefore, the war's effect on GDP in 2023 is estimated to be approximately 1.4%.

High Uncertainty Looms

The chief economist stressed that the ongoing conflict introduces unprecedented levels of uncertainty. Nevertheless, it is evident that the economic impact surpasses any security incident witnessed by Israel in the past two decades.

These updated growth forecasts precede anticipated government discussions on the revision of state budgets for 2023 and 2024, underscoring the urgency and gravity of the economic challenges faced by the nation in these tumultuous times.