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Occupied Jerusalem – With the continued Israeli occupation aggression against… Gaza strip، The crises in the Israeli economy are increasing, the most recent of which is the Bank of Israel’s reservation (the central bank) regarding the amendments proposed by Finance Minister Bezalel Smotrich, to the 2023 budget, amounting to 31 billion shekels ($8.3 billion), including 22 billion shekels for the Ministry of Defense and 9 billion for civilian expenditures, in addition to reducing… Spending amounted to 4 billion shekels.
The draft budget received the support of the Prime MinisterBenjamin Netanyahu، The amendments provide for expanding the budget framework and increasing the deficit by 9%, which is opposed by the Bank of Israel, which justified its reservations by saying that the Minister of Finance refrains from reducing allocations to the government coalition parties.
Smotrich also opposes transferring the budgets of the government coalition agreements for the year 2024, to cover the expenses of the war on Gaza, which may exceed 250 billion shekels ($66.77 billion) until the end of the year, according to the latest estimates of the Bank of Israel.
Politics and disputes
Last October, the budget in Israel recorded a deficit of 23 billion shekels ($6.14 billion), in light of the rise in war expenses, and the deficit is expected to rise by the end of this November, at a time when Israel announced that it had borrowed about 30 billion shekels. ($8 billion) since the start of the war.
According to the Bank of Israel, the Minister of Finance proposes to transfer budgets and transfer them from one ministry to another, expand the budget framework and deepen the budget deficit, which portends another blow to the Israeli economy, while the Bank calls on the Israeli government to discuss the 2024 budget now, examine the coalition’s funds and announce the reduction.
The professional staff at the Bank of Israel confirms that an examination of the budget items indicates possible reductions amounting to between 8 and 10 billion shekels in 2024, according to the Globes economic newspaper.
Amid the disagreements and uncertainty in economic policies, the Calcalist economic newspaper revealed that the Minister of Finance will soon present a new budget law for the year 2023 to be presented to the Knesset (Parliament), even though the budget expires in a few weeks on December 31.
Decrease and slow down
And it went down gross domestic product In the third quarter of last year, by 2.8%, compared to the previous quarter, while per capita consumption decreased by 0.1%, according to preliminary estimates by the Israeli Central Bureau of Statistics, issued today, Thursday.
It is inferred from the data (until the end of September) that the per capita GDP stopped at 0.9% on an annual basis, which is a very low rate and indicates a continued slowdown in the Israeli economy even before the war on Gaza, according to the economic affairs correspondent for the newspaper ” Yedioth Ahronoth” Gad Lior.
According to these statistics, the slowdown and decline will continue Economic growth During the next year, due to the repercussions of the war, despite the fact that Israel enjoys a better growth rate compared to many countries, while Lior says, “The war is expected to completely change the economic landscape.”
Speaking to Al Jazeera Net, Lior attributed these concerns to the position of the international credit rating company Standard & Poor’s, after it lowered about two weeks ago its expectations for Israel’s rating from stable to negative, based solely on the data of the Israeli market and economy in the first month of the war.
Lior explained that the International Credit Company’s forecasts for the Israeli economy portend a worse situation than the forecasts of the Ministry of Finance and the Bank of Israel, as – for the first time since the beginning of the Corona crisis – Israel will witness negative per capita growth in 2023, and Israel is expected to witness a decline in the standard of living in the near future.
According to the international credit rating company, Israel’s GDP is expected to shrink by 5% in the fourth quarter of 2023 due to the war on Gaza, and the company expects Israel’s growth to reach only 1.5% in 2023.
This growth is considered negative per capita at 0.5% due to the population increase in Israel this year by about 2%, while next year negative growth per capita is expected at 1.5%, due to the effects and repercussions of the war on the economy.
Weakness and decline
In this context, the correspondent of the Calcalist economic newspaper, Adrian Vilot, said that the growth figures for the third quarter are less important and not of value, after the failure and failure to prevent the “operation of…Al-Aqsa flood“On October 7, after which a downturn in the economy and a sharp decline in per capita growth are expected.
He added that the growth rates for the third quarter of 2023 give an important signal, confirming that the Israeli economy entered this major event and the war on Gaza not from a point of strength and strength, but rather from a point of weakness and after a long process of weakening and declining growth and economic activity, and this is due to the economic policies of the Ministry of Finance. .
He explained that the policies of the Ministry of Finance, which are based on partisan and coalition considerations and the preservation of the government coalition, continue during the war period, despite the painful blow that the Israeli economy received, as the controversy continues over the use of coalition funds to finance war expenses, at a time when the transfers of funds necessary for the reconstruction of the front are delayed. The interior and the towns of the “Gaza envelope”.
Adrian Vilot believes that the big concern is that the Minister of Finance wants to put war expenses in the category of non-war expenses, such as coalition and government funds and budgets, in order to mislead rating companies and foreign investors, which may cause an economic disaster, after the security disaster caused by the Netanyahu government. .
In contrast to the difficulty of transferring funds for civilian purposes, as this difficulty comes for political rather than professional and economic reasons, Vilot says, “The Knesset Finance Committee approved the transfer of two billion shekels to the Ministry of Defense for various defense expenditures and projects, independent of the debate over the deficit and the budget framework.”
War and economy
In turn, political economist Mtanes Shehadeh believes that the Bank of Israel aims to maintain the budget framework as much as possible and not expand the deficit, because it is clear – due to the war and its economic repercussions – that there will be a noticeable decline in Israel’s revenues.
Shehadeh explained to Al Jazeera Net that the Bank of Israel, as well as the professional staff in the Ministry of Finance – and in contrast to the minister’s position – have concerns that the war on Gaza will contribute to more pressure on the shekel, and perhaps its continued decline in global markets, as well as a decline in incomes, with an indication of a continued rise in financial inflation during 2024. .
He believes that the Bank of Israel aims to contain the economic damage and not expand it, and therefore it is turning to an economic control plan during the war by reducing budgets and budget expenses, and transferring all budgets allocated to the parties participating in the government coalition to war purposes, in light of the increase in war expenditures.
Regarding the Bank of Israel’s insistence on the necessity of transferring government budgets to the war effort, Shehadeh says, “Given that these budgets are available and easily accessible and do not cost the budget framework anything, it is a quick and initial step, but it will not be the last, and it is the alternative to persisting in borrowing from abroad.”
Saddam and challenges
The expert in political economy confirmed that the difference in positions is mainly due to political considerations on the part of Minister Smotrich, as his decisions are due to partisan political considerations, in order to preserve the strength of the government coalition and not clash with the Haredi parties, which will not hesitate to dismantle the government if its budgets are reduced.
On the other hand, the Bank of Israel has its professional considerations, and it sees a bleak picture for the future of the Israeli economy during the coming year, and it is not inconceivable that the economic conditions will become more difficult, especially with the continuation of the war.
He pointed out that the bank’s position is not only due to the warnings of credit rating agencies, but also to the challenges that will accompany the Israeli economy next year, such as the weakness of the Israeli economy’s global ranking, the increase in the cost of Israel’s foreign loans, the decline in foreign investments, the slowdown in the economy, and the rise in unemployment.
