S&P Global, a renowned ratings agency, has stated that Israel’s economy is expected to recover at a slower pace compared to previous downturns, despite a rebound in the first quarter. The Israeli economy saw growth in the first quarter after experiencing a decline late last year during the conflict with Hamas in Gaza. In the first quarter, the Gross Domestic Product (GDP) grew by an annualized 14.1%, following a 21.7% annualized contraction in the previous quarter.
S&P maintained its growth estimate of 0.5% for 2024, with an expected acceleration to 5.0% in 2025. However, the agency noted that the recovery from the recent conflict is likely to be slower compared to past recoveries from events like the COVID-19 pandemic or previous military conflicts. Israeli policymakers are optimistic about the economy’s resilience and anticipate a faster bounce back, with the central bank forecasting around 2% growth in 2024.
Despite this optimism, S&P highlighted several challenges that will hinder a speedy recovery this year. These include issues in the tourism, construction, and agriculture sectors, as well as ongoing security concerns and political uncertainty. The agency also expressed concerns about elevated risks to Israel’s credit profile, particularly the potential escalation of conflicts with Iran or Hezbollah in Lebanon. Last month, S&P downgraded Israel’s long-term ratings to A-plus from AA-minus, citing heightened geopolitical risks and projecting a budget deficit of 8% of GDP in 2024, following a similar ratings cut by Moody’s in February.
In conclusion, while Israel’s economy is expected to recover at a slower pace compared to previous downturns due to several factors such as geopolitical risks and economic challenges such as issues in tourism and agriculture sectors; policymakers remain optimistic about bouncing back quickly from this recession with their projection of around 2% growth for next year
