Citibank lowers Israel forecast on judicial overhaul, policy fears

Citibank lowers its forecast for Israel’s economy in 2023 and 2024, citing a drop in investments due to fears over the government’s judicial overhaul and other policy decisions.

The report sees Israel’s 2023 growth projections dropping from 3.3% to 3.1%, while the 2024 forecast falls from 3.3% to 2.8%.

“The recent turmoil surrounding judicial reform in Israel has raised questions about its impact on the economy,” Citi says. “While there may be short-term effects on growth due to disruptions in economic activity, the more significant impact is likely to be on Israel’s potential growth in the intermediate term.”

Beyond the controversial overhaul, the report singles out the government’s policy priorities.

“It is not only the judicial reform legislation that might have a significant impact on potential growth in Israel, but a range of other governmental decisions as well such as budget allocations, education policy, etc,” the report says in an apparent reference to the decision to allocate vast chunks of the budget to ultra-Orthodox communities.

“These decisions will affect many aspects of the country and its economy and, by extension, most asset classes,” the report says. “Unfortunately, it’s not hard to imagine further declines in growth, which may increase the likelihood of a downgrade of Israel’s credit rating,” it warned.