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The Bank of Israel building is seen in Jerusalem June 16, 2020. Finance Minister Bezalel Smotrich has said the government will spend whatever is needed on the war and on compensation. Bank of Israel Governor Amir Yaron on Monday cautioned that it was "important to continue conducting responsible fiscal policy." The central bank projects the debt-to-GDP ratio growing to 62% this year and to 65% in 2024 from 60.5% in 2022. Israel will have to raise more debt, but the government still has some manoeuvring room, given the relatively low budget deficit and debt-to-GDP ratio before the war as well as its long-term debt portfolio, the ministry official said.

Persons: Ronen, Bezalel Smotrich, Amir Yaron, Steven Scheer, John Stonestreet Organizations: of, REUTERS, Rights, Hamas, Bank of Israel, Thomson Locations: of Israel, Jerusalem, Israel, Gaza

The cost to Israel's economy of its war with Hamas militants will be unlike anything it has experienced in decades. "This is not a hit for contractors or industrialists alone," said Raul Sarugo, president of the Israel Builders' Association. Israel was blindsided on Oct. 7 by Hamas gunmen from Gaza who rampaged through border towns in the deadliest attack on civilians in its history. The conflict has also halted the movement of thousands of Palestinian labourers from Gaza to Israel and curtailed the flow from the occupied West Bank. The Economy Ministry created a war room and put out a call for help.

Persons: Raul Sarugo, Israel, Netanel Shraga, Barak Klein, ThetaRay, Erel Margalit, Dror Bin, We've, Bin, Leo Leiderman, Amir Yaron, Yaron, Steven Scheer, Ari Rabinovich, Toby Chopra Organizations: Hamas, Israel Builders ' Association, West Bank, Columbia, HIGH, TECH, Factories, Israel Innovation Authority, Ministry, Bank Hapoalim, Israeli Finance Ministry, Reuters, of Israel, Thomson Locations: Israel, Gaza, Israel's, Iran, Lebanese

"But there is no doubt this war will have fiscal implications that will depend on its intensity and duration," he said in published remarks. "However, with the appropriate budget adjustments, ones that I believe are manageable, there should be no major changes to our fundamental fiscal position." He noted that Israel entered this war with a very solid fiscal position - a debt-to-GDP ratio just below 60% and a budget deficit of around 1.5% of GDP with similar projections for 2024. The central bank, Yaron noted, was using a variety of policy tools to assure the continuing functioning of the markets. Yaron said Israel's forex reserves of some $200 billion "provides us with ample capacity to support the Israeli economy."

Persons: Amir Yaron, Yaron, Israel, Israel's, Steven Scheer, Ari Rabinovitch, Louise Heavens, Giles Elgood Organizations: Bank of Israel, Hamas, The Bank, Israel, Thomson Locations: Gaza, Israel

The Bank of Israel building is seen in Jerusalem June 16, 2020. The move appeared to quickly calm the market as the shekel recovered from steep early losses. The central bank also said it would provide liquidity through SWAP mechanisms in the market of up to $15 billion. "The Bank of Israel will continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary," it said. Last month, Bank of Israel Governor Amir Yaron told Reuters that despite the sharply weaker shekel that has helped to push up inflation, there was no need to intervene since there were no market failures.

Persons: Ronen, Amir Yaron, Steven Scheer, Ari Rabinovitch, Emily Rose, Jacqueline Wong, Sonali Paul Organizations: of, REUTERS, Rights, Bank, Israel, Palestinian, Bank of Israel, Reuters, Thomson Locations: of Israel, Jerusalem, Gaza, Israel, Egypt, Yom

The Bank of Israel building is seen in Jerusalem June 16, 2020. The shekel fell 2.2% versus the dollar to 3.924 - its lowest since a 2016 - after the announcement, then steadied. The central bank also said it would provide liquidity through SWAP mechanisms in the market of up to $15 billion. "The Bank of Israel will continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary," it said. Israel's dollar-denominated government bonds also fell sharply in early European trading as investors got their first chance to react to the unprecedented weekend attack.

Persons: Ronen, Amir Yaron, Steven Scheer, Ari Rabinovitch, Emily Rose, Marc Jones, Jacqueline Wong, Sonali Paul, Andrew Heavens Organizations: of, REUTERS, Rights, Bank, Israel, Palestinian, Citi, Bank of Israel, Reuters, Thomson Locations: of Israel, Jerusalem, Gaza, Israel, Egypt, Yom, Tel Aviv, London

The new documents, reviewed by Reuters, shed light on the concern among the Finance Ministry's most senior officials, who cited unease among foreign investors and a shekel that has depreciated sharply to a three-year low. "Implementing the proposed judicial reform could bring very significant harm to the economy," said a document from the ministry's chief economist. The ministry's budget department wrote separately that there have been "initial indications" of the development of negative sentiments towards the Israeli economy. Moody's Investor Service said this month that the Israeli government's planned judicial reforms could weaken institutions and negatively impact Israel's sovereign credit profile. The Bank of Israel, which has urged judicial independence, expects economic growth of below 3% in 2023 after a 6.4% spurt last year.

JERUSALEM, Feb 28 (Reuters) - Israeli Finance Minister Bezalel Smotrich said on Tuesday he saw the country's economy being strengthened by the government's proposed judicial overhaul, but that he would assume responsibility for any economic harm caused by it. "There is a sort of a jolt in the Israeli public, this is being reflected in certain vectors in the economy. I don't see a catastrophe," Smotrich said at a news conference to provide details of the 2023-24 state budget. The cabinet on Friday approved the 2023-24 state budget draft that the Finance Ministry expects will be fully ratified by the end of May. The budget allocates spending of 484.8 billion shekels ($132 billion) this year and 513.7 billion next year.

The central bank as expected lifted its key rate to a 14-year high of 3.75% from 3.25%. "We won't hesitate to raise rates further," Yaron said, adding he expects inflation to start easing in the second quarter. "We are determined to reduce the inflation rate and to return it to within the target range," Yaron said. "It is important to remember that the Israeli economy cannot take for granted the high regard from the rating entities and international financial institutions." Israel's economy grew an annualised 1.9% in the third quarter from the second quarter, slower than a 7.4% pace the prior three months.

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