The chief economist of the Ministry of Finance expected… Israel Shmuel Abramson expects its economy to contract by 1.5% if the war continues Gaza Until the end of the current year, after it was expected to grow by 2.7% for the year 2024 before the start of the war, according to a report carried by the Israeli economic newspaper “Globes”.
According to the basic scenario – which expects the war to end next February, Abramson – according to his report – expected the Israeli GDP to grow by 1.6% during the current year, with a contraction in terms of per capita terms.
The basic scenario assumes that the war on the Gaza Strip will continue for 5 months, ending next February.
Tax revenues in Israel are likely to decline by 33 billion shekels ($8.7 billion) during 2024, compared to the expectations of the Office of the Chief Economist in the Ministry of Finance in May 2023.
Israel's treasury is expected to record a deficit of 52 billion shekels ($13.74 billion) due to lower revenues alone.
Abramson presented economic data to the Cabinet showing that the volume of Israeli credit card purchases declined sharply in recent months compared to the third quarter of 2023.
Although the volume of purchases is rising again towards third-quarter levels – according to the report – the decline amounted to 8 billion shekels ($2.11 billion) in cumulative losses.
Regarding the state budget, Abramson indicated that the planned fiscal deficit of 6.6% in 2024 would be the highest of any country except the United States.
The average fiscal deficit in advanced Western economies in 2024 is expected to reach only 1.3%.
It is noteworthy that the Israeli government agreed the day before last Monday, after strenuous attempts, to amend the state’s general budget for the year 2024, by raising it to 582 billion shekels ($156 billion), that is, an increase of 70 billion shekels ($19 billion) over the original budget, taking into account Increased expenses on defense operations as a result of the war on the Gaza Strip.
The Ministry of Finance was forced to make concessions before approving the budget, as the ministers opposed the cuts and threatened not to support the budget in the Cabinet session last night, and this morning they obtained concessions in personal meetings with the Prime Minister. Benjamin Netanyahu.
The main conflict was over cuts in the budgets of various ministries after the Ministry of Finance announced a comprehensive reduction of 3%, which was raised at the last minute to 5%.
Netanyahu and his Finance Minister, Bezalel Smotrich, sought not to undermine the stability of the coalition and were content with minor amendments.
In turn, the expert in Israeli affairs, Ahmed Al-Bahnasi, said in a comment to Al-Jazeera Net that the prediction of the chief economist of the Israeli Ministry of Finance for a contraction of 1.6% in Israel’s economy if the war continues during the current year is a modest expectation.
Al-Bahnasi expected a greater contraction in the economy given the escalatory approach followed by Prime Minister Benjamin Netanyahu on the northern front with Lebanon or the prolongation of the war in the Gaza Strip to find a political way out of the issues sparked by the war.
He said that Netanyahu's continued presidency of the Israeli government means more budget deficits and contraction, noting that the budget reflected the logic of “no voice rises above the sound of war.”
Al-Bahnasi pointed out that the Israeli Basic Law makes passing the budget a basis for the continuity of any government, recalling what Benjamin Netanyahu did in the coalition government that he formed with Naftali Bennett within the “Blue and White” coalition according to an agreement for the former to assume the prime ministership for a period and the other to take over after him, but Netanyahu “struck “We became a wedge” at the time of handing over the presidency of the government – according to Al-Bahnasi – when he obstructed the budget, which led to the overthrow of the entire government.
Al-Bahnasi pointed out that the deductions in the Israeli budget from the allocations for Palestinians inside the country remained as they were and were not canceled like many allocations, at a time when Haaretz newspaper pointed out the repeated deductions from their allocations, saying, “Arabs always pay,” adding that they are mostly marginalized.
For his part, expert in Israeli affairs, Ashraf Hamed, told Al Jazeera Net that the losses of the Israeli economy are greater than what is announced even within expectations, given that the majority of the population are army reserves, and those who are not called to military service take shelter in a shelter with every siren.
According to Hamed, mitigating economic losses is an approach that is parallel to reducing the number of soldiers killed and wounded as a result of battles, which is what military experts point out.
He adds that most of the workers in Israel were Palestinians, and they are now prohibited from entering the areas within the Green Line, which made Israel resort to other labor markets in India and Africa, but in general the economic environment does not yet support the recruitment of workers.
Source : Al Jazeera + Agencies + Israeli press