IMF Cuts Israel's Growth Forecast for 2019, Again
The International Monetary Fund lowered its growth forecast for Israel to 3.1%, after lowering it from 3.5% to 3.3% in April. It also cut its global growth forecast for this year, lowering it to 3% from the 3.2% it forecasted in July—the lowest forecast in a decade
Bad news for the global economy and for Israel— the International Monetary Fund cut its global growth forecast for 2019 yet again, from 3.2% in July to 3%, IMF announced Tuesday. This is its lowest growth forecast since the 2008 financial crisis. The fund also lowered its growth forecast for Israel to 3.1%, after lowering it from 3.5% to 3.3% in April. The global projection for 2020 was lowered from 3.5% to 3.4%, while for Israel it was lowered to 3.1%. The fund also predicted a 3% growth rate for Israel in 2024.
Last week, the Bank of Israel reiterated its 3.1% forecast for 2019 but cut its 2020 forecast to a pessimistic 3%. According to the bank, Israeli inflation will stay at the lower limit of the government's price stability target (1%-3%) in 2019, before rising to 1.3% in 2020, though that is still below the mid-range target Bank of Israel governor Amir Yaron has set. While IMF projected a very low inflation rate for Israel for the next two years, it has also estimated that Israel's low unemployment rate will continue at around 4%.
Tel Aviv. Photo: Amit Sha'al
According to IMF, the U.S. will see 2.4% growth in 2019, down from 2.9% in 2018, after the effects of President Donald Trump's tax reform passed two years ago have dissipated. The U.K.'s projection was cut from 1.4% to 1.2% due to Brexit uncertainties. Germany will see growth as low as 0.5% in 2019, down from 1.5% in 2018. China will be down to 6.1% from 6.6%. The biggest loser is Saudi Arabia, which had its 2019 projection cut from 1.9% to 0.2%.
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IMF cited trade tensions, a projected slowdown in the U.S. and Chinese economies, a global decrease in manufacturing, and growing geopolitical uncertainty as some of the reasons behind the global downturn. The report's authors state those tensions and risks have yet to be felt in their entirety thanks to a quick response by the central banks, which changed policies accordingly, and also as a result of the continued resilience of the service sector which supports employment growth. The authors cautioned, however, that the outlook "remains precarious."
