Israeli Election Results Could Impact Economy and Stock Market, Experts Say

Investment house IBI has analyzed the potential economic consequences of the upcoming Knesset elections, scheduled for October 27. The analysis outlines three scenarios that could influence the exchange rate, interest rates, credit rating, and business activity. The first scenario suggests that a change in government could improve financing conditions, strengthen the shekel, and reduce the economy's risk premium. Conversely, the second scenario, which considers the continuation of a similar coalition, might lead to a negative market reaction if concerns arise about foreign relations and stability. The third scenario warns that political indecisiveness could delay budgets and burden the economy and investments. The real estate sector is expected to be directly affected, particularly concerning interest rates and land marketing. IBI predicts that improved economic conditions would support demand for apartments, while political instability would hinder new project financing. A stronger shekel could also impact the purchasing power of high-tech workers and foreign residents. The commercial and office real estate sector is sensitive to changes in the risk premium and capitalization rates. In the banking sector, the primary impact will be on the cost of risk, with a lower risk premium aiding funding efforts, whereas instability would increase financial risk. The effects vary across energy, technology, and defense sectors. IT companies will be influenced by the 2027 state budget and the exchange rate, while defense sector demand depends on global armament trends, with elections only affecting order approval speed. In renewable energy, a change in government might increase support for the sector, while political continuity would advance existing plans. IBI concludes that the key question post-election will be the actual decisions made regarding the budget, infrastructure investments, and public debt.