Israel's economic challenges are primarily driven by military expenditures related to ongoing conflicts, which are expected to continue impacting growth in the near term.
The IMF's cautious outlook reflects a broader trend of geopolitical instability affecting global economic forecasts, particularly in emerging markets like China and Russia.
Despite negative projections for Israel, the global economy shows signs of resilience, particularly in the United States and some Eurozone countries.
If current military conflicts persist, Israel's economy may face further downgrades in growth forecasts from credit agencies.
Global economic growth could remain subdued if geopolitical tensions escalate, particularly in energy markets.
Emerging economies may continue to struggle with growth, particularly if China fails to stimulate domestic demand effectively.
IMF Cuts Israel's Economic Growth Forecast Amid Military Spending
The International Monetary Fund (IMF) has revised its economic growth forecast for Israel to 0.7% for 2024, down from a previous estimate of 1.6% made in April. This adjustment comes as the country faces increased military spending due to ongoing conflicts in Gaza and Lebanon, which are straining the economy. The IMF's World Economic Outlook report indicates that while Israel is expected to utilize higher government spending to mitigate the economic impact of the war, uncertainty remains high due to the volatile security situation.
Global Economic Outlook Remains Cautious
In a broader context, the IMF has also revised its global economic growth forecast for 2025 to 3.2%, reflecting a slight decline from earlier expectations. This is attributed to a slowdown in key emerging economies, including China, Russia, and Mexico. The IMF's chief economist, Pierre-Olivier Gourinchas, highlighted the growing geopolitical tensions and potential risks to energy prices as significant concerns that could impact global economic stability. Despite these challenges, the IMF noted that the return of inflation to a target of 2% in major economies signifies some positive developments.
Future Projections and Risks
The IMF anticipates that Israel's economy will grow by 2.7% in 2025 and 3.4% by 2029, contingent on the resolution of current conflicts. However, credit rating agencies such as Standard & Poor's and Moody's have expressed skepticism, citing increased security risks and potential military escalation as factors that could hinder growth. Moody's has downgraded Israel's credit rating, warning of a possible
