IMF Warns of Risks to Israeli Economic Growth Due to Judicial Reform, External Factors
The International Monetary Fund (IMF) issued its initial annual report on Wednesday, warning of risks to the growth of the Israeli economy due to the government’s judicial reform and external factors. The report was submitted to Israel’s Finance Minister Bezalel Smotrich and Bank of Israel Governor Amir Yaron.
According to the report, continued uncertainty around the judicial reform presents a notable downside risk to growth. Economic activity and inflation could be negatively affected by a renewed surge in global energy prices, new supply chain disruptions, or increased geopolitical tensions.
The analysis highlights Israel’s remarkable economic performance in 2022, with growth reaching 6.5%, driven by a vibrant high-tech sector, and unemployment at a record low. Public debt-to-GDP fell rapidly to pre-pandemic levels, international reserves are ample, the external position is strong, and the banking sector has adequate capital and liquidity buffers.
The IMF recommends that Israeli authorities prioritize education reform and infrastructure investment to enhance potential growth. The report also suggests that the 2030 electricity sector target appears difficult to achieve without reductions in other sectors, and enacting a climate law and defining a carbon pricing mechanism is advised.
