OECD estimates lesser growth in Israeli economy than promised

By Al Mayadeen English
Source: News Websites
2 May 2024 15:08

According to Globes, the OECD found that a 1.9% growth would hit the Israeli economy, compared to the 2% the Central Bank promised.

This picture taken on August 23, 2022, shows a view of the exterior of the headquarters of the Bank of 'Israel', the country's central bank. (AFP)

The OECD revealed that the Israeli economy would see a growth of 1.9% in 2024, compared to its pre-war forecast of 3.3% growth. In 2025, the Israeli economy is expected to grow by 4.6%.

The OECD's report exhibits a discrepancy between its forecast and the Israeli Central Bank's 2% projection for 2024, and 5% for 2025. The International Monetary Fund also estimated a lower growth of 1.6% for 2024, but a higher one for 2025, standing at 5.4%.

This outlines how the Israeli economy is being adversely affected by its war, with the report further emphasizing the construction sector's setback because of the absence of foreign laborers. According to the OECD, there has been a 53% decrease in the rate of new settler housing projects in occupied territories during the final quarter of 2023, with only a partial rebound anticipated in 2024.

The document further states that inflation in "Israel" has remained relatively low since reaching its peak (5.4% in January 2023), projecting a 2.5% inflation rate for 2024, compared to the Israeli Central Bank's forecast of 2.7%. The OECD anticipates inflation to persist at this level in 2025, allowing the Bank of "Israel" to reduce the interest rate to 3.75% (down from the current 4.5%) in the upcoming year.

Regarding fiscal policy, the report indicates that besides the expenses related to the war, defense costs are expected to permanently increase by at least 0.5% of GDP.

Lapid: Middle class collapsing, government got to go

On Tuesday, the leader of the opposition in the Israeli government, Yair Lapid, stated that prices in "Israel" are rising, warning of the collapse of the middle class.

Through platform X, Lapid expressed that "prices are rising, and the middle class is collapsing," adding that "the current government is costing us dearly; if it does not step down, prices will continue to rise."

In this context, Israeli media reported an imminent wave of price increases starting Wednesday, noting that "in addition to the rising price of gasoline, which will increase again in May, government-regulated dairy products have become more expensive, with a long list of increases in food and cleaning product prices set to take effect."

Days ago, "Israel's" Channel Kan cited a senior source in the government's Ministry of Finance stating, "If the war continues, there is no choice but to raise taxes."

The source confirmed that the Israeli Ministry of Finance is considering raising taxes soon to finance the expenses of the war on Gaza.