Treasury cuts Israel’s 2023 growth forecast

Israel’s Ministry of Finance Chief Economist Shira Greenberg has revised Israel’s 2023 GDP growth forecast downwards from 3.5% (as predicted in the June 2022 report) to 3%. Israel’s economy is heading for 6.3% GDP growth in 2022, the Ministry of Finance predicts, after growing 8.6% in 2021

The Bank of Israel also forecasts 3% GDP growth in 2023 and 6% in 2022, while the OECD sees Israel GDP growth of 2.8% in 2023 and 3.4% in 2024. S&P sees Israeli GDP growth of just 2% in 2023.

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The latest report by the Ministry of Finance Chief Economist said, “The labor market is still tight, and the forecast assumes that the unemployment rate will rise slightly in 2023. Trends in the capital market are characterized by great volatility. The forecast is based on an assumption that in 2023 the indices will return to an upward trend, although at a moderate rate. Price increases along with the stable situation in the labor market have led the Bank of Israel to hike the interest rate. During the year the central bank has raised the interest rate by 3.15% cumulatively in six increments, to 3.25%.”

The Chief Economist’s latest forecast sees significant reduction in the growth of public consumption – from 3.7% in the June forecast to 2.1% in the current forecast. The growth forecast for private consumption has declined from 3.6% in June to 3.2% now.

Domestic gross investment is forecast to rise by 5.1%, while in the previous forecast 3.3% growth was estimated. The increase in investment in fixed assets is estimated at 5.4% (compared to 3.9% in the previous forecast), exports will increase by 4.2% and imports by 5.6% (compared to growth of 3.5% and 3.8% respectively in the June forecast).

The Chief Economist’s report sees inflation reaching 5.1% in 2022 in Israel, falling to 2.7%-3.7% in 2023.

Published by Globes, Israel business news – en.globes.co.il – on December 12, 2022.

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