2023-12-31 05:56:17
2023: A Year of Struggle and Resilience for Israel’s Economy
The year 2023 was one of the most challenging years for the State of Israel, marked by internal struggles and external attacks. From the bitter internal conflict over the reform of the justice system to the devastating Hamas attack on settlements surrounding Gaza, the country faced significant upheaval. Despite these challenges, the Israeli economy managed to weather the storm, and the performance of the capital market in 2023 has been summarized.
While the year saw fluctuating and stormy conditions, the main economic indicators ended with only moderate changes. The TA-35 index rose by about 3%, rebounding from sharp declines recorded during the war. The shekel, which initially fell against the dollar due to legal reform and hostilities in the south, made a recovery in recent weeks, strengthening at the end of the year by only 3%.
Meanwhile, investors in overseas stock markets had an excellent year, with the S&P 500 and Nasdaq indices increasing by 24% and 45% respectively, reaching new highs.
Looking ahead, forecasts for 2024 paint an optimistic picture, with investment houses predicting positive year in the markets. The stock exchange in Tel Aviv is expected to rise at a double-digit rate, making up for the lag accumulated in 2023.
It is also anticipated that interest rates in Israel will drop sooner and faster, driving growth in the stock and bond markets. Additionally, a gradual recovery is expected for Israel’s economy, as interest rates are predicted to decrease, and inflation is expected to return to the target range.
However, the investment houses’ predictions in the past have not always been accurate. In 2023, there were substantial gaps between forecasts and the performance of markets and the actual local economy. The struggle surrounding legal reform and the war in Gaza led to more significant lapses in accuracy.
Looking back at 2023, while the TA-35 index rose by about 3%, the S&P 500 index surged by 25%, double the average expectation. The dollar rate also rose, and the interest rate was substantially higher than forecast, resulting in difficulty predicting the level of interest necessary for central banks to combat inflation.
As for 2024, investment houses are anticipating a rise in the TA-35 index by 12%, with a slight growth in the dollar exchange rate and a reduction in the Bank of Israel’s interest rate.
The challenge remains in accurately predicting market trends, given the ongoing geopolitical uncertainty. Nevertheless, the overall outlook for the Israeli capital market in 2024 is cautiously optimistic, with expectations for positive growth and a gradual recovery from the previous year’s turmoil.
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