Israel’s real gross domestic product (GDP) is expected to grow about one percent this year and around two percent in 2004, in line with the rebound in global markets and assuming no deterioration in the security situation, according to a preliminary IMF Article IV Consultation report.
The protracted decline in economic activity since October 2000 has given way to an incipient recovery led by external demand, stated IMF. The macroeconomic policy mix in 2003 was characterized by a considerable weakening in public finances and a gradual relaxation of monetary policy following a major tightening in 2002. Weakness in public finances intensified in early 2003, as government expenditures continued to grow, while revenues plummeted.
As a result, the 2003 budget deficit is projected to reach 5.5 to six percent of GDP, compared to a target of three percent in the budget, even after the emergency economic program of March 2003 and the special emergency aid from the United States. Public debt kept rising and will reach about 106 percent of GDP by the end of the year, the IMF forecasts.
A welcome and essential shift in the policy mix began with the formulation of the economic program in March 2003. It is the IMF’s opinion that a stronger commitment to lowering the deficit and debt was a reassuring step toward fiscal consolidation. Optimism solidified with a rebound in the global economy, the decision by the United States to extend loan guarantees, and the ending of the major conflict in Iraq. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
