1 week Ago By Bloomberg News
Israel’s central bank said that US-imposed tariffs are affecting the Jewish state’s economy as markets and tech investments come under risk. Market turmoil and a slowdown in global trade are Israel’s largest concerns given that the country’s exports are service-driven and largely excluded from newly imposed levies, Governor Amir Yaron said in an interview with Bloomberg Television in Washington Friday. Many of Israel’s pension funds are invested in the stock market, while its tech industry is funded to a large extent by US venture capital money, “so to the extent that uncertainty weighs on those two things, that’s also directly affecting our economy,” said Yaron, a former banking and finance professor at the University of Pennsylvania’s Wharton School.
“The major issue is to come to sustainable arrangements and to reduce the uncertainty as fast as one as one can. That will help the economy both here and abroad,” he added. US President Donald Trump’s administration imposed a 17% tariff rate on Israel, making it one of the hardest hit nations in the Middle East despite their close alliance.
Israel had a trade surplus of $7.4 billion with the US in 2024, excluding services, according to data released by the Office of the US Trade Representative. The central bank this month lowered Israel’s gross domestic product growth projection for 2025 to 3.
5%, down half a percentage point from a previous forecast, in part due to the tariffs. Israeli officials are working on a package of steps to be presented to the Trump administration in an attempt to lower the levies that were placed on hold for 90 days for all nations. Still, the country’s larger challenge remains its ongoing war with Hamas in Gaza, where fighting resumed last month following the end of a two-month ceasefire.
Inflation has exceeded the central bank’s target of 1-3% since last summer and measured 3.3% in March, prompting policymakers to retain a restrictive stance that’s persisted throughout the conflict.Yaron said that demand has been “excessive” due to labor shortages and the central bank expects that to balance out in the second half of the year, permitting two interest rate cuts over the next 12 months.
At the same time, sticky inflation, a weakened shekel, and a rise in US consumer prices are all upside risks to future cuts, he added.He noted that in a second scenario laid out by the central bank in which there’s further escalation in Gaza that continues for another six months — including a larger call in of reserve forces — GDP growth could drop to just 3% this year. From an economic perspective, the end of the conflict and sustainable security arrangements would translate to less uncertainty that will not only boost the Israeli economy but that of the region as a whole, Yaron said.
“That will allow us to direct more energy toward items like education, infrastructure and enhance potential growth,” he said. . Read more on World by NDTV Profit.
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