An initial annual report, issued by the International Monetary Fund (IMF) on Wednesday, warned of risks to the growth of the Israeli economy due to the government’s judicial reform and external factors.
An IMF delegation visiting Israel submitted the report to the country’s Finance Minister Bezalel Smotrich and the Governor of the Bank of Israel Amir Yaron.
The report, which analyzes the Israeli economy in 2022 and includes forecasts and recommendations, stated that continued uncertainty around the judicial reform presents a notable downside risk to growth.
It noted that economic activity and inflation could both be negatively affected by a renewed surge in global energy prices, new supply chain disruptions, or an increase in geopolitical tensions.
It said that Israel’s economic performance in 2022 was remarkable with growth reaching 6.5 percent, which was pushed by a vibrant hi-tech sector, and with unemployment at a record low.
The report added that 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.
Furthermore, it noted that to enhance potential growth, Israeli authorities must prioritize education reform and infrastructure investment.
The analysis indicated that the 2030 electricity sector target, although feasible, appears difficult to reach without reductions in other sectors, therefore, enacting a climate law and defining a carbon pricing mechanism is recommended. ■