Israel’s central bank has downgraded its outlook for the domestic economy this year and next as a result of the armed conflict with the Palestinian Hamas movement. The bank now expects Israel’s GDP to increase by two per cent this year and next.
Interest rate unchanged
The bank also, as expected, left its key interest rate unchanged for the fourth consecutive month at 4.75 percent, its highest level since 2006. Bank officials are focused on maintaining financial stability in the context of the current conflict. Central Bank Governor Amir Yaron has said that cutting rates makes no sense given the uncertainty in the economy.
“The war has had significant economic impacts, both on real economic activity and on financial markets,” the bank said in a statement. “There is great uncertainty about how long and with what intensity the war will last,” it added.
10 percent of GDP
Central Bank Governor Yaron further stated that the conflict will cost the state, taking into account costs and lost revenues, roughly ten percent of gross domestic product (GDP). He thus confirmed a figure reported in early November by the economic daily Kalkalist, citing the Israeli Finance Ministry.
According to the newspaper, Israel’s war with the Palestinian radical movement Hamas in the Gaza Strip will cost the Jewish state 200 billion shekels. The forecast is based on the assumption that the war will last eight to twelve months and will be limited to the Gaza Strip.
Source Czech Press Office
