From the Liveblog of
Monday, January 6, 2025
Bank of Israel moderately raises growth outlook for 2024, 2025 citing lower risk premium after Lebanon truce
Add ToI as a Preferred Source on GoogleSharon Wrobel is a tech reporter for The Times of Israel
The Bank of Israel moderately raises its growth outlook for 2024 and this year citing a significant decline in the country’s risk premium following a ceasefire reached in November with Hezbollah after more than a year of fighting.
The central bank now expects the economy to have grown by 0.6 percent in 2024, 4% in 2025, and 4.5% in 2026, assuming that the “direct economic impact of the war will continue until the end of the first quarter of 2025.” That forecast was revised from a previous growth projection in October of 0.5% in 2024 and 3.8% in 2025.
The central bank says that “in view of geopolitical developments, the recovery in economic activity continues at a moderate pace.”
“Geopolitical developments since the October forecast have reduced the risk of a situation in which growth will be markedly lower than the forecast,” the central bank says. “The government’s approval of the budget, and the Knesset’s passage of the package of tax measures, have moderated the risks that the debt will grow out of control and that the risk premium will increase as a result.”
Back in October, the central bank slashed its growth outlook for 2024 and 2025 as the prolonged war with Hamas and intensified fighting with Hezbollah continued to take a heavy toll on the country’s finances.
Alongside the revised growth forecasts, the central bank decides to hold the benchmark interest rate at 4.5% for an eighth consecutive meeting, citing tax changes that came into effect on January 1, “particularly the increase in VAT, along with continued supply constraints and excess demand, that are expected to raise the inflation rate in the first half of the year.”
The decision is in line with forecasts by most economists.
The Times of Israel Community.