Bank of America’s mid-year review, published on Thursday, revealed that Israel is on track to achieve its target of a 6.5% deficit this year. However, the report also stated that an escalation of conflict in the north could hinder Israel’s ability to meet its deficit goal and negatively impact its economy. The report analyzed the potential impact of opening a new front in the north on Israel’s economy compared to a stable conflict scenario.
According to the report, war-related expenditures were highlighted as one factor contributing to Israel’s large fiscal deficit, despite quick recovery in demand. Other challenges mentioned included a weak currency, higher tax rates, and inflationary pressures from supply-side constraints. The analysis predicted that Israel’s central bank rate would remain at 3.75% by the end of 2025, with potential rate cuts expected for the following year if there is no escalation in the north.
If there is no escalation in the north, Bank of America suggested that Israel’s economy would gradually normalize with a decrease in risk premiums. The report also forecasted GDP growth of 2.2% in 2024 and 3.5% in 2025, along with consumer price index inflation reaching 2.8% in 2025 and dropping to 2.3% in 2026. The analysis emphasized the importance of political stability in the region for Israel’s economic prospects.
Overall, Bank of America emphasized that political stability was crucial for Israel’s economic prospects and urged caution against any escalation of conflict in the north that could negatively impact its economy and financial stability.
In conclusion, Bank of America mid-year review states that if there is no escalation of conflict in the north, Israel will gradually normalize its economy with a decrease in risk premiums and GDP growth forecasted at 3.5% for 2025 along with consumer price index inflation dropping to
