The Bank of Israel (BoI) has revised its economic forecasts downward, citing increased geopolitical uncertainty and a more severe security outlook. The central bank now expects the economy to grow by just 0.5 per cent in 2024, down from its July estimate of 1.5 percent, and by 3.8 per cent in 2025, down from 4.2 per cent. Inflation is also projected to be higher than previously anticipated, reaching 3.8 per cent in 2024 and 2.8 per cent in 2025. The Bank of Israel has raised its interest rate forecast to 4.5 per cent by the third quarter of 2025, reflecting the need to address rising inflation. The increased geopolitical uncertainty and the possibility of more severe security scenarios have tilted the risks to the growth forecast downward. However, the risks to inflation, interest rates, and the government deficit have been revised upward. Attribution: BoI Research Department Staff Forecast October 2024
