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IMF says uncertainty over judicial overhaul poses ‘risks’ to Israeli economy



Prolonged uncertainty over Israel’s judicial overhaul presents a “notable downside risk” to the country’s economy, the International Monetary Fund (IMF) on Wednesday.

“Absent the emergence of a durable and politically sustainable solution, continued uncertainty could significantly increase the price of risk in the economy, tightening financial conditions and hindering investment and consumption, with potential repercussions for growth, also in the longer term,” the IMF said in its initial country report on the Israeli economy. “Permanently lowering the uncertainty around judicial reform requires a politically sustainable solution that is clearly communicated and well understood both domestically and abroad.”

“As in any country, maintaining strength of the rule of law would be important for economic success,” it was written in the report.

The warning comes after Moody’s Investors Service said in April that the key trigger for lowering Israel’s credit rating outlook to “stable” from “positive” was concern that the planned changes to the country’s legal system would threaten the independence of the judiciary, which is crucial in particular in Israel. The agency kept the country’s actual credit rating intact at A1, citing “strong economic growth and improving fiscal strength.”


Senior executives and entrepreneurs from Israel’s business and tech community have taken to the streets in recent months to publicly voice their concern over the judicial overhaul and senior economists have repeatedly warned that the planned government moves will essentially neuter Israel’s democratic system of checks and balances and undermine the rule of law.

Following the protests, the advancement of the proposed judicial changes was paused in March to allow for negotiations between coalition and opposition representatives in an attempt to formulate broad consensus on the judicial reform.

File: The logo of the International Monetary Fund is visible on their building, Monday, April 5, 2021, in Washington. (AP Photo/Andrew Harnik)

The IMF’s initial country report was presented to Finance Minister Bezalel Smotrich and Bank of Israel Governor Amir Yaron. The IMF’s detailed annual country report will be published at a later stage.

While warning about the downside risk to Israel’s economy posed by the proposed judicial changes, the IMF commended Israel for its “remarkable” recovery from the coronavirus pandemic in 2022, which it said was based on strong fundamentals propelled by a “vibrant” high tech industry.

“Public debt-to-GDP fell rapidly to pre-COVID levels, international reserves are ample, the external position is strong, and the banking sector has adequate capital and liquidity buffers,” the IMF noted.

Looking ahead, “the outlook is for growth to slow broadly in line with its potential, as inflation falls to the targeted range by the end of 2024,” the IMF said.

The IMF cut Israel’s growth outlook for 2023 to 2.5% from 2.9% after the economy expanded by 6.4% last year. That is in line with Bank of Israel’s projections of growth of 2.5% in 2023 and 3.5% in 2024.

In early April, the OECD cautioned that the country’s pace of economic growth is expected to moderate, warning that “risks are skewed to the downside, related to high global and domestic uncertainty.” The organization sees GDP slowing to 3% in 2023 and 3.4% in 2024.

Tech workers protest against the government’s judicial overhaul ‘time is running out for Israeli hi-tech,’ in Tel Aviv, on March 23, 2023. (Avshalom Sassoni/Flash90)

Among the downside risks to growth for Israel, the IMF also cited spillovers from a weaker global economic outlook, a renewed surge in global energy prices, new supply chain disruptions, and growing geopolitical tensions.

The IMF expects the global economy to expand 2.8% this year and 3% in 2024 slowing from GDP growth of 3.4% in 2022, amid the banking system turmoil, high inflation, and tighter monetary policy.

Commenting on the IMF review, Yaron noted that the report “indicates the robust economic baseline conditions of the Israeli economy, alongside the challenges it faces, as well as the range of vital policy measures implemented by the Bank of Israel to eradicate inflation and maintain the stability and advancement of the Israeli economy.”

The IMF report praised Israel for its “prudent” fiscal management and recommended monetary policy to remain tight as inflation is still hovering around 5% and is above the government target range of between 1% to 3%.

“Fiscal policy should safeguard fiscal buffers while raising growth-enhancing spending,” the IMF said. “The fiscal stance seems adequate to preserve buffers, but additional fiscal space is needed for boosting potential growth and reducing inequality.”

The IMF recommended further education reforms and additional investment in infrastructure to ease traffic congestion and improve job accessibility which it said could boost GDP growth and reduce inequality.

Standard & Poor’s rating update

The IMF review on the Israeli economy comes ahead of Standard & Poor’s update on the country’s credit rating which is expected to be released late on Friday. Following its last review in November, S&P kept Israel’s favorable rating unchanged at AA- with a “stable” outlook, citing the country’s wealthy and resilient economy.”

In January S&P’s Global Ratings director Maxim Rybnikov told Reuters that risks to the country’s ratings are balanced, but that could change as the agency was closely watching the government moves on the advancement of the proposed judicial overhaul.

“If the announced judicial system changes set a trend for a weakening of Israel’s institutional arrangements and existing checks and balances this could in the future present downside risks to the ratings. But we are not there yet,” said Rybnikov.

Aiming to at least avert a downgrade in Israel’s credit rating outlook, Prime Minister Benjamin Netanyahu and President Isaac Herzog, who is hosting compromise talks on the overhaul, are said to have held discussions in recent days with senior S&P officials, trying to reassure the agency that legislation has been paused to reach broad agreements and will not be advanced in its original format, Calcalist reported.

“There is no shift expected in Israel’s rating outlook as the legislation on the judicial overhaul has now been frozen for one and a half month and politicians, including the prime minister have indicated that they will not pursue a unilateral move,” Jonathan Katz, chief economist at Leader Capital Markets, told The Times of Israel.

Bank Hapoalim economists expect S&P’s update on the country’s sovereign rating to focus on macroeconomic risks and the fiscal situation and less on judicial overhaul concerns.

Hapoalim forecasts zero economic growth in the coming quarters with the possibility of a contraction in Israel’s GDP. The economists cited a decline in the exports of goods in the first quarter and in the activity in the high-tech sector, as well as a slowdown in private consumption, and a drop in building starts.

Israel’s vaunted tech sector has long been touted as the main engine of Israel’s economic growth, accounting for 50% of total exports and generating around 15% of GDP in 2022.

“The decline in the high-tech sector may not be unique to Israel, but the industry’s high share of GDP is now weighing on economic growth,” Hapoalim economists wrote in a recent report. “Unlike Moody’s, it is reasonable to assume that S&P will also note the economic risks and the deterioration in the fiscal situation (…) they may place less emphasis on the risk of the judicial reform, in light of the ongoing negotiations.”



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Quebec proposes making French mandatory for all economic immigration programs – Canada Immigration News



Published on May 29th, 2023 at 07:00am EDT


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Quebec is proposing that speaking French become mandatory criteria for provincial applicants.

Quebec Premier Francois Legault has proposed major changes to Quebec’s economic immigration criteria.

Speaking on May 25 with the Minister of Immigration, Francisation and Integration, Christine Frechette and the Minister of the French Language, Jean-François Roberge, Legault says the changes will ensure that nearly 100% of new economic immigrants to Quebec will know French before they arrive in the province by 2026. This is meant to promote Francophone economic immigration in Quebec.

“As we have seen for several years, French is in decline in Quebec,” said Legault. “Since 2018, our government has acted to protect our language, more than other successive governments since the adoption of Bill 101 under the Lévesque government. But if we want to reverse the trend, we must go further. By 2026, our goal is to have almost entirely Francophone economic immigration. We all have a duty, as Quebecers, to speak French, to transmit our culture on a daily basis, and to be proud of it.”

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Knowledge of oral French will be required for adults. This is meant to ensure that those who wish to settle in Quebec will be able to communicate in French throughout day-to-day interactions at work and in their communities.

The changes are part of a new permanent immigration program for skilled workers in Quebec. The province says the Skilled Worker Selection Program will “take into account the diverse needs of Quebec.”

Candidates in the program will be evaluated in four categories that have not yet been made clear, but the province says that three of the categories will require that the principal applicant and their accompanying spouse have knowledge of French.

There will also be revisions to existing programs. For example, the work experience requirement will be removed from the Quebec Experience Program for graduate students from a French-language study program.

Family reunification measures include making it mandatory for the guarantor to submit a plan for reception and integration that will support the learning of French for the person they are hosting.

Immigration is a shared responsibility between the federal and provincial governments. Quebec’s agreement is unique from other provinces in that it can select all its economic immigrants. Quebec does not have the authority to select family class sponsorship applicants or those who arrive in Canada as refugees or other humanitarian classes.

For 2023, Quebec has targeted that 65% of newcomers admitted to the province will be economic class.

Increasing immigration numbers in Quebec

The province is also considering raising the number of permanent selection admissions from 50,000 to 60,000 per year by 2027. This is in stark contrast to Legault’s recent comments that there was “no question” of Quebec accepting any rise in the number of newcomers and publicly rejecting the federal Immigration Levels Plan, which has a target of 500,000 permanent residents admitted to Canada each year by the end of 2025.

These changes also follow Quebec’s Immigration Levels Plan for 2023, where it was announced that the province would move away from plans that forecast only the coming year and begin introducing multi-year plans for immigration by 2024.

Why the changes?

Quebec is unique in Canada as it is the only province where French is the official language. The province is fiercely protective of its language, saying it is vital to protecting Quebec’s unique culture and status.

Legault is the leader of the Coalition Avenir Québec (CAQ) and is currently in his second term as Quebec’s premier, having been reelected last October. One of the main pillars of the CAQ party is to protect the French language in Quebec.

Immigration was one of the key issues in the recent election. Throughout his campaign, Legault said that Quebec would allow only 50,000 immigrants per year into the province as it would be difficult to accommodate and integrate more than that into Quebec society. He said that accepting more than that would be “a bit suicidal.”

Regardless, Quebec, like the rest of Canada, is experiencing a labour shortage as the population ages and the birth rate remains low. A report released last March by the Canadian Federation of Independent Business shows that the province could face an annual shortfall of up to nearly 18,000 immigrants, who would be able to fill Quebec’s labour needs.

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Lira hits record low, but stocks rise after Erdogan win in Turkey



The Turkish leader won the presidency for a third time after a run-off vote on Sunday.

The Turkish lira has plunged to record lows after the re-election of President Recep Tayyip Erdogan, a sign that currency markets are not confident in the country’s economic future after the longtime leader’s re-election.

The Turkish currency weakened to 20.01 to the dollar on Monday after the high-stakes run-off a day earlier.

But Turkish stocks, on the other hand, rose as Erdogan entered a third decade in power with the benchmark BIST-100 index up 3.5 percent and the banking index rising more than 1 percent.


The lira fell to a record low as the country battles a cost of living crisis and depleted foreign reserves.

On the campaign trail, Erdogan pledged to slash inflation to single digits and boost economic growth, a message he reiterated in his victory speech late on Sunday. But analysts said his economic policies are unorthodox and predicted they will lead to more pain for Turks.

“In our view, Erdogan’s biggest challenge is Turkey’s economy,” Roger Mark, an analyst at the Ninety One investment management firm told the Reuters news agency. “His victory comes against a backdrop of perilous economic imbalances with his heterodox economic model proving increasingly unsustainable”.

Hasnain Malik, head of equity research at Tellimer, an emerging markets research firm, told the agency: “An Erdogan win offers no comfort for any foreign investor.”

“Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy,” he said.

Interest rate cuts sought by Erdogan sparked a devaluation of the Turkish lira in late 2021 and sent inflation to a 24-year peak of 85.5 percent last year. The president had argued that higher interest rates cause inflation while central banks around the world were raising rates to reduce price rises.

Turkey’s struggling economy, also reeling after the country’s devastating double earthquakes in February, was a major thorn in Erdogan’s prospect for re-election.

The leader has defended his economic policies, reassuring Turks that investment, production, exports and an eventual current account surplus will drive up Turkey’s gross domestic product.



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U.S. economy and new incentives put Canada at disadvantage in Stellantis negotiations, professor says




Two weeks of negotiations between the federal and provincial governments and Stellantis have failed to produce a new deal for the NextStar EV battery plant in Windsor, Ont. Ian Lee, an associate professor at Carleton University’s Sprott School of Business, says the economic might of the U.S., coupled with the incentives offered in recent legislation, make it extremely challenging for Canada to compete.



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