Photo: Flash90

Israeli economy blossoms

Despite devastation on businesses wreaked by the coronavirus pandemic, the Israeli economy is expected to rebound with a 7.1% rise this year.

By Erin Viner

The Finance Ministry announced the rapid recovery from the COVID-19 crisis in a rosy forecast surpassing previous projections of just 5.1% growth in 2021.

The new estimation is more closely aligned with that by the Bank of Israel’s forecast of a 7% increase.

The main growth driver of the Israeli economy is private spending, which is expected to increase 13.1% this year, after a drop in 2020 while exports are recovering due to resiliency in the country’s hi tech sector.

Israel launched its world-leading vaccine rollout in December 2020, following a year which saw shrinkage in the economy. The picture brightened after imposition of a third nationwide lockdown in March of this year, with a 16.6% surge in the second quarter at an annual rate from the prior three months. More than 44% of the nation’s population of 9.4 million citizens have already been administered the third COVID booster shot, while 62% have received two shots. Vaccines are now being prepared to be given to children between the ages of 5 to 11.

Preliminary gross domestic product data from the third quarter, due to be released later today, is expected to reflect an annualized 6% rise according to a Reuters poll of economists.

An additional bright spot was ratification by the Knesset earlier this month of the 2021 -2022 state budgets after the legislation had been stalled by political infighting for more than 3 1/2 years.

Israel’s economy grew just 3.8% in 2019.

According to the Finance Ministry projection, Israel will see a 2.8% inflation rate this year, with a drop to 2.1% in 2022. Both rates are well within the government’s annual target of 1-3%. The Central Bank deemed some inflation pressures as transitory, as the strong showing by the national currency has been helping to keep imported prices under control.

₪1 Israeli Shekel is currently worth €0.28 or $0.32.

This year’s 25% surge in tax revenues is expected to amount to ₪16.5 billion shekels (about €4,670 billion or $5.3 billion).

So far, projections for economic growth in 2022 is a 4.7% estimate by the Finance Ministry and 5.5% rise forecast the Bank of Israel. Private spending is expected to increase by another 7.5% next year.