Gov't policy uncertainty hampers economic forecasting forum

• Published date: 25 January 2023
• Publication title: Globes (Rishon LeZion, Israel)

As the drafters of the document at the Ministry of Finance obliquely hint, at least some of the forecasts for the coming year are still in the realm of educated guesses, until the new government's plans become clear. "Government policy, particularly fiscal policy, that will be introduced in Israel in the period of the forecast will have substantial consequences for the local economy, and at this time uncertainty as to this policy still prevails," the document states at the end of the survey in listing risks

The forum experts see moderate growth, of 2.7%, for Israel in 2023. This is lower than the Ministry of Finance's own current 3% forecast, reduced from 3.5% last month. For 2024, the experts' growth forecast is 3.3%, close to the ministry's forecast of 3.2%.

Inflation to moderate

The forum economists expect that the rate of inflation will moderate and will return to within the 1-3% target range this year. "On average, the Consensus experts predict an inflation rate of 2.8% in Israel at the end of 2023, and 2% at the end of 2024," the survey states. This compares with inflation of 5.5% in 2022.

It would appear, though, that there wasn't actually a consensus at the forum on the optimistic inflation forecast. Greenberg states towards the end of her survey that "Inflation in Israel has not yet changed direction, and there is a fear that it will stabilize above the target range, and opposing that there is the fear that the monetary policy in place has been too contractionary, in a way that is liable to cause a more substantial slowdown than expected."

The forum expects the shekel to continue to weaken, making it harder to...