Amir Yaron, the Governor of the Bank of Israel, reportedly warned ministers on Thursday about an economic crisis breaking out due to rising concerns about the government’s planned judicial overhaul.
In recent weeks, entrepreneurs and investors have become spooked because of the overhaul plans and this has resulted in worries about an economic downturn.
On Thursday, Shira Greenberg, the chief economist of the Finance Ministry, and Yaron had been asked for sharing their observations about the potential harm to the economy.
This occurred during the discussion session by Nir Barkat, the Economy Minister, who also shared warnings that he had received about a serious economic fallout from figures in the business and tech industry.
Greenberg had stated that there could be a snowball effect and said that the economy was in ‘significant danger’.
On Thursday, a draft for the multi-year budget 2024-27 had been sent to the coalition government of Prime Minister Benjamin Netanyahu and a report had accompanied it.
In the said report, Greenberg warned that the market was perceiving the judicial overhaul as damaging to the independence and strength of government institutions.
She also said that the investment environment was also experiencing increasing uncertainty because of it. She said that it was likely to harm economic activity, especially private investments.
These warnings have been shrugged off by the premier and he did the same on Thursday. Netanyahu said that people driven by political motivations were issuing these warnings to cause hysteria.
He also insisted that these warnings would eventually be proven wrong. Greenberg referred to several studies in her report.
These highlighted a positive relationship between private investments, particularly foreign direct investments and economic growth and the independence and strength of state institutions.
Greenberg also warned about the reaction of credit rating agencies to these developments.
On Thursday, BDI, the credit and data firm in Israel, published a separate report in which it said that one in five big companies were considering or had already moved their funds out of the country.
More than 900 firms had been covered in the survey and these included companies from various sectors, including real estate and tech.
Almost 60% of these companies revealed that a declining shekel and market jitters had resulted in a revenue decline because consumer prices went up and imported goods became more expensive.
On Tuesday, the first piece of the controversial legislation passed the initial readings in the Knesset, which saw the shekel plunge to its weakest value against the US dollar in three years.
There was also a decline in the Tel Aviv stock index. The vote occurred even though there had been a lot of opposition and mass protests had been carried out.
There has been a 7% decline in the value of the shekel in the past month because of dampening market mood and sentiment and huge protests.
Barkat said that he had been warned that the economy would come crashing down. He favors the judicial overhaul, but has called for dialogue and negotiations.