Israel economy to grow lower than expected 3% in 2023

Israel’s economic growth is set to slow sharply to three per cent in 2023 after rapid expansion in the prior two years, the Finance Ministry said on Monday as it cut its estimate from 3.5 per cent, citing more restrained consumer and state spending.

Consumer spending — more than half of Israel’s economic activity — looks to ease to 3.2 per cent growth in 2023. Exports, another key growth driver, is expected to grow 4.2 per cent next year.

This year, boosted by higher consumer spending expected at seven per cent and a surge in exports (+11.8) and investment (+10.9 per cent), growth is forecast at 6.3 per cent, revised up from the ministry’s prior estimate of 4.9 per cent in July.

Israel’s economy grew 8.6 per cent in 2021 in a year the ministry said was a recovery from the Covid-19 pandemic.

Inflation, it said, is expected to end 2022 at 5.1 per cent but ease back to 2.7 per cent by the end of next year, moving back to within on official annual 1-3 per cent inflation rate range amid aggressive Bank of Israel interest rate increases.

To combat inflation and high living costs, the central bank has raised its benchmark interest rates to 3.25 per cent from 0.1 per cent in April. The rate is expected to reach as high as four per cent.

The Bank of Israel will decide again on interest rates on Jan 2 while also publishing updated macroeconomic forecasts. In October, it projected economic growth of six per cent in 2022 and three per cent in 2023, with an inflation rate of 4.6 per cent this year and 2.5 per cent rate next year. — Reuters

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