The Bank of Israel decided to reduce the interest rate by 0.25% and set it at 4.5% due to the impact of the Gaza war in the economy, while its monetary committee “focuses on stabilizing markets and reducing uncertainty.”
“The war has significant economic consequences, both in real economic activity and in financial markets,” and “there is great uncertainty regarding the expected severity and duration of the war, which in turn is affecting the extent of the impact on “economic activity,” the Bank of Israel said this Monday.
As he stressed, “there was a strong recovery in the financial markets after the falls at the beginning of the war,” while according to the banking entity’s forecast, The gross domestic product (GDP) “will grow by two percent in 2023 and 2024, and five percent in 2025.”
Even so, “in view of the war”, which has been going on for almost three months and is expected to last until 2024, the prospects are presented “with a high level of uncertainty, even in the decisions that the government will have to make about how the budget will address civil and defense needs arising from the war.”
On the other hand, “indicators of economic activity and employment status point to a gradual recovery after the sharp decline that occurred with the outbreak of war,” but this varies depending on the economic sector and specific industries.
Impact on the real estate sector
In the real estate sector, during the last 12 months, home prices “have decreased by 1.3%and the volume of activity in this market continues to moderate,” as the sector “experiences difficulties as a result of the war.”
On the other hand, the credit market “continues the trend towards a slowdown in bank credit to companies and households, in parallel with the general slowdown in economic activity.”
At the labor market level, it “was in an environment of full employment before the war,” but After the start of the conflict “the general employment rate increased sharply and remains high”.
However, the Bank of Israel highlighted that “in recent months there has been a significant improvement” in labor matters, yeIn November, the general unemployment rate at 8.5%, compared to 9.5% in October.
On the other hand, after an initial drop, “there was a recovery in the volume of credit card transactions, and total purchases returned to a level similar to those before the war.”
Besides, “the fall in imports of goods has deepened in recent months,” and “tax revenues in November were about 18 percent lower in real terms than the same period last year.”
The Bank of Israel’s analysis at a global level is that “economic activity in major economies is moderating and the global manufacturing sector and trade continue to weaken.”
In turn, “the defense situation in Israel, which has caused an increase in geopolitical tension in the Middle East, had a relatively moderate impact on global financial markets.”
Source: Gestion
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