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Israel's government aims to manage the fiscal deficit

Wednesday, October 30, 2024

Significance

The measures, which amount to about 2% of GDP, reflect the economy's failure fully to recover from the shock of the first months of the war. GDP growth is slowing and military spending has surged. War-related supply constraints have boosted inflation and prevented interest rate cuts.

Impacts

  • The government's borrowing costs are rising after credit rating downgrades.
  • The war will likely encourage long-term increases in defence spending.
  • The war is unlikely to disrupt commercial and investment links between Israel and the United Arab Emirates.

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