Israel Cuts 2024 Growth Estimate as Conflict with Hezbollah Escalates

 Women carrying rifles walk on Dizengoff Square, amid the ongoing conflict between Israel and Hamas in Gaza and the hostilities between Hezbollah and Israeli forces, in Tel Aviv, Israel, October 28, 2024. (Reuters)
Women carrying rifles walk on Dizengoff Square, amid the ongoing conflict between Israel and Hamas in Gaza and the hostilities between Hezbollah and Israeli forces, in Tel Aviv, Israel, October 28, 2024. (Reuters)
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Israel Cuts 2024 Growth Estimate as Conflict with Hezbollah Escalates

 Women carrying rifles walk on Dizengoff Square, amid the ongoing conflict between Israel and Hamas in Gaza and the hostilities between Hezbollah and Israeli forces, in Tel Aviv, Israel, October 28, 2024. (Reuters)
Women carrying rifles walk on Dizengoff Square, amid the ongoing conflict between Israel and Hamas in Gaza and the hostilities between Hezbollah and Israeli forces, in Tel Aviv, Israel, October 28, 2024. (Reuters)

Israel's economy lost about 14 billion shekels ($3.75 billion) since the military conflict with Hezbollah in Lebanon escalated over the past month, the Finance Ministry said on Tuesday.

In an updated forecast, the ministry's economists estimated growth of 0.4% in 2024, down from a prior forecast of 1.1% and well below a projected 1.9% in May.

"This scenario is no longer relevant since the fighting expanded starting at the end of September to the northern arena," the ministry said in a report.

Since its last estimate in September, the geopolitical situation changed drastically - the fighting against Palestinian armed group Hamas in Gaza became less intense but intensified in Lebanon as Israel responded to Hezbollah rockets with airstrikes and a ground incursion.

That required a large call up of more army reservists, while Hezbollah rocket fire into Israel sent citizens into shelters, hurting the economy by 0.7 percentage point, the ministry said.

It previously had believed that intense fighting would continue through the first quarter of 2025 but its latest forecast expects the worst of the fighting to end in 2024.

Growth, it said, looks to be 4.3% in 2025 - down from a prior 4.6% - as the economy starts to rebound.

Should fighting continue into 2025 and the return of the economy to normal is delayed, growth this year would be 0.2% and 3.4% next year, the ministry said.

The Bank of Israel earlier this month trimmed its 2024 economic growth estimate to 0.5% from 1.5% and foresees 2025 growth of 3.8% in 2025.

With Israel's population growth at least 1.6% a year, the economy is likely to contract this year on a per capita basis.

Growth was just 0.3% in the second quarter but despite the weakness Bank of Israel policymakers have no intention of lowering interest rates, but rather have warned of rate increases should inflation stay high.



Saudi Arabia’s Private Sector Ends 2024 with Strongest Sales Growth

 The Saudi capital, Riyadh (AFP)
 The Saudi capital, Riyadh (AFP)
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Saudi Arabia’s Private Sector Ends 2024 with Strongest Sales Growth

 The Saudi capital, Riyadh (AFP)
 The Saudi capital, Riyadh (AFP)

Saudi Arabia’s non-oil private sector concluded 2024 on a high note, with significant increases in sales and business activity fueled by robust domestic and international demand.
The Kingdom’s non-oil GDP is expected to grow by over 4% in both 2024 and 2025, supported by notable improvements in business conditions, according to Riyad Bank’s Purchasing Managers’ Index (PMI) report.
Despite inflationary challenges, the Riyad Bank PMI recorded 58.4 points in December, reflecting strong and accelerated economic recovery, albeit slightly lower than November’s 59.0 points.
The solid performance highlights improvements across non-oil sectors, with new business activity in December growing at its fastest pace in 12 months. This growth reflects rising domestic and global demand. Renewed marketing efforts and strong customer demand encouraged companies to boost production and expand operations, particularly in wholesale and retail.
The PMI has remained above the neutral threshold of 50.0 points since September 2020, signaling continuous expansion in Saudi Arabia’s non-oil economic activity.
The International Monetary Fund (IMF) previously projected sustained momentum in Saudi Arabia’s non-oil reforms, estimating non-oil GDP growth for 2024 at between 3.9% and 4.4%. The IMF noted that growth could reach 8% if reform strategies are fully implemented.
Expansion in International Markets
A surge in exports was among the key factors driving non-oil economic growth in Saudi Arabia. December saw the largest increase in export orders in 17 months, underscoring the success of Saudi policies in opening new markets and fostering strong international trade relationships, supported by ongoing product innovation.
Higher domestic and international demand boosted production levels in December. Companies also worked to enhance operational efficiency, leading to a notable increase in inventory. Purchasing activity accelerated to its highest level in nine months, reflecting the sector’s ability to effectively meet rising demand.
Cost Pressures on Production
Despite significant growth in production and sales, the sector continues to face challenges related to sharp inflation in input costs, driven by heightened demand for raw materials. These pressures have led to higher product prices, although some companies opted to reduce prices to remain competitive and address elevated inventory levels.
Meanwhile, wage cost increases were less pronounced, helping mitigate economic pressures related to salaries.
Future Outlook
Dr. Naif Al-Ghaith, Chief Economist at Riyad Bank, highlighted the positive end to 2024 for the Kingdom’s non-oil private sector, reflecting the progress achieved under Saudi Arabia’s Vision 2030. He noted that the PMI score of 58.4 points demonstrates the sector’s resilience and ongoing expansion.
Al-Ghaith expects non-oil GDP to grow by over 4% in 2024 and 2025, driven by improved business conditions and rising new orders, signaling increased market confidence and demand. Elevated domestic demand and export growth have pushed total sales to their highest level in a year. This, in turn, has led to strong increases in business activity and inventory levels, demonstrating the sector’s ability to meet and capitalize on excess demand, he underlined.