A report by the International Monetary Fund (IMF) cautioned that the uncertainty caused by the Israeli government-proposed judicial reform could prompt Israeli hi-tech companies to relocate abroad.
The report issued on Thursday said that if a large enough number of hi-tech firms relocate, Israel’s strong economic growth potential could be jeopardized, as the capital stock and labor market productivity could be permanently damaged.
It added that without a durable and politically sustainable solution, the high levels of uncertainty could significantly increase the price of risk in the economy. Consequently, financial conditions would be tightened and consumption and investment ultimately slowed, Xinhua news agency reported.
It also noted that the investment could be affected by the relocation of hi-tech firms which conduct cross-border activities, rely on international financing, and employ skilled and internationally mobile workers.
The report expected Israel’s economic growth to slow to about 2.5 per cent this year as households purchasing power moderates and firms rein in investment.
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