Israel’s government confident worst is over for war hit economy

Israel’s government is confident the economy, strained by wars in Gaza and Lebanon, will rebound strongly next year as fighting eases.

“We do expect the conflict to wind down,” Shmuel Abramzon, the Finance Ministry’s chief economist, said to Bloomberg Television on Tuesday. “We expect a positive year” in 2025, he said.

The government sees gross domestic product rising 4.3 percent next year, higher than the projection of just 0.4 percent in 2024.

Abramzon, speaking from Jerusalem, said markets supported the view of an economic rally next year. He cited the strengthening of Israel’s shekel since early October and rise in the stock market, as well as falling prices for the government’s credit-default swaps. Yields on Israeli sovereign local-currency bonds have also dropped in that period.

That’s largely down to Israel’s military successes against Hezbollah and growing optimism that a cease-fire with the Lebanese militant group is imminent.

“There’s still substantial uncertainty that needs to be resolved,” Abramzon said. An economic improvement “will rely on the way things end up on the security front.”

The cabinet of Prime Minister Benjamin Netanyahu is confident the parliament, or Knesset, will pass its 2025 budget without trying to make major changes, he said.

“The parliamentary process is always somewhat tough with negotiations,” he said. “At the end of the day, it’s a coalition parliament that the cabinet has quite strong control over.”

The spending plan forecasts a fiscal deficit of 4.4 percent of gross domestic product next year. That would be down from the 2024 figure, which will probably end up around 8 percent because of a surge in war-related spending and a slowdown in many sectors of the economy. The 2025 plan includes taxation measures and some spending cuts that total around 35 billion shekels ($9.6 billion).