Dozens of military buildings and weapons infrastructure belonging to the Hezbollah/IDF Spokesperson terrorist organization were attacked
The Ministry of Finance's Chief Economist's Department provided a survey with a dire forecast ahead of the approval of the state budget for 2024 at the last cabinet meeting. The content of the survey published today expresses, for the first time, the economic consequences of fighting on the northern front.
By calculating, the Ministry of Finance presents the scenarios for which it is preparing – and perhaps also the limits of the war that it can meet at most. Thus, it also presents in Israel's revenue forecasts. In May 2023 (about six months before the war), revenues in 2024 were expected to be NIS 485.5 billion, and are now expected to decline by NIS 36 billion following the war to NIS 449.1 billion. 2023 revenue is also down 24 billion following the three-month campaign.
State Revenue Outlook - Chief Economist's Department/Screenshot, Walla!
Against the background of the warming of the northern sector and the intensification of the attacks in southern Lebanon, the Ministry of Finance's Chief Economist's Department decided to add to the survey another scenario that was rarely discussed in public forums: the implications of the northern campaign on the Israeli economy. There, the forecasts become bleaker because the same campaign, which will begin at the end of the campaign in the south, entails a longer campaign that will paralyze parts of the economy for a long time, and according to the reference scenario on which the economist relies, will also include damage to infrastructure.
In one of the slides presented to government ministers, it appears that the growth rate forecast would have been 2.7 percent without the war, in a "basic" scenario defined by the Ministry of Finance: a southern front and incidents on the northern border, and a limited five-month campaign, the growth forecast is still positive at 1.6 percent. However, if a northern war begins, which the Ministry of Finance defines as "intense fighting against Hezbollah that will include disruptions in infrastructure and last an entire quarter" (in addition to months of fighting in the south), the growth forecast will turn negative and fall to -1.5 percent.
More in Walla!
Study funds ended 2023 with phenomenal returns
See full article >
Growth forecast in various scenarios - from the chief economist's presentation/screenshot, Walla!
The Treasury Department warns of a scenario of ending the war without restoring a sense of personal security, saying that this will bring risks to the forecast – and vice versa, according to the review given – the sooner the war ends "while restoring personal security", the more opportunities it can create opportunities for positive changes in the forecast. Additional parameters of opportunity lie in immigration to Israel, the infusion of capital from Diaspora Jewry, and the resumption of normalization.
- More on the subject:
- Chief Economist
- Hezbollah
- Iron Sword War
- Gaza War
- Ministry of Finance