The Treasury Department cut its economic growth forecasts for this year and next amid expectations of lower state revenues.
After Israel bounced back strongly from the COVID-19 crisis, recording positive growth of 6.5% in 2022, the ministry now forecasts growth of 2.7% in 2023 and 3.1% in 2024, which is one They have been revised down from their March forecasts of 3% and 3.2%, respectively. According to the International Monetary Fund, the global economy is projected to grow by 2.8% in 2023.
The Ministry of Finance has updated its macroeconomic forecasts as the government pushes forward to pass the 2023-2024 biennial budget bill by the May 29 deadline.
The Treasury Department expects government revenue (taxes and other income) to be collected by Israel in 2023 at NIS 463.6 billion, which is NIS 5.3 billion less than its previous forecast in January. The ministry forecasts revenue of NIS 487.2 billion in 2024, which is NIS 10.9 billion lower than its January forecast.
The ministry said one of the reasons for the renewal was the slowdown in tax revenues and a sharp decline in domestic high-tech investment in the first quarter of this year, partly because of the global economy and high interest rates. This is due in part to the impact of the interest rate environment and market uncertainty around the judicial reform proposal.
“The more the market perceives that judicial reforms will adversely affect the independence of state institutions, particularly the strength of checks and balances between the judicial system and authorities, and increase uncertainty, the more significant reforms are expected.” It’s hurting economic growth and activity, especially foreign investment,” said Shira Greenberg, chief economist at the Treasury Department in a Macroeconomic Update.
The Treasury Department stressed that potential downside risks to forecasts make it more urgent for governments to maintain fiscal buffers that can cope with future changes in forecast growth and state revenues.