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.



Gold Firms; Focus on US Data for Cues on Fed's Policy Path

FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo
FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo
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Gold Firms; Focus on US Data for Cues on Fed's Policy Path

FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo
FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo

Gold prices hovered near a four-week peak on Thursday, while focus shifted to jobs report due on Friday for clarity on the Federal Reserve's 2025 interest rate path.
Spot gold edged 0.1% higher to $2,664.30 per ounce, as of 0732 GMT. US gold futures rose 0.4% to $2,681.80
"Prices are trading in a narrow range ... A new trigger is needed for gold to breach its resistance," said Ajay Kedia, director at Kedia Commodities in Mumbai.
The bullion hit a near four-week high in the previous session after a weaker-than-expected US private employment report hinted that the Fed may be less cautious about easing rates this year.
The market now awaits US jobs report on Friday for more cues on the Fed's policy path.
Investors are also awaiting Donald Trump to take office on Jan. 20 and his proposed tariffs and protectionist policies are expected to fuel inflation.
Policymakers at the Fed's last meeting also "noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated," the minutes showed on Wednesday.
Bullion is considered an inflationary hedge, but high rates reduce the non-yielding asset's allure.
"We believe the bulk of the rally has been put in and that while gold's upward momentum may carry it higher in the near term and in early 2025, a combination of physical and financial market factors may tame the rally and drive gold moderately lower by the end of next year," HSBC said in a note.
Elsewhere, physically-backed gold exchange-traded funds (ETFs) registered their first inflow in four years, the World Gold Council said.
Spot silver added 0.2% to $30.17 per ounce, platinum dropped 0.3% to $952.54 and palladium shed 0.8% to $921.37.