Israel’s economy will show growth of 7.1% for 2021, reflecting the country’s rapid recovery from the coronavirus pandemic, the Finance Ministry said Monday.
GDP will continue to grow another 4.7% in 2022 as private consumption and tax revenues continue to rise. The ministry had previously forecast 5.1% growth this year.
The model takes into account dealing with the fourth wave of the coronavirus without severe restrictions on economic activity, the Finance Ministry said.
In 2020, under the shadow of the global crisis, Israel’s economy contracted a smaller-than-expected 2.4%, after growing 3.8% in 2019. That loss may already be made up by 2022, the Treasury said.
During the second quarter of 2021, after Israel reopened from its third lockdown, GDP grew a whopping 16.6% at an annual rate, as private consumption returned to near pre-crisis levels and exports of hi-tech services jumped. Third-quarter growth was more moderate, while inflation rose and capital markets reached record levels, the Finance Ministry noted.
Private consumption, which fell a sharp 9.2% in 2020, is recovering this year at a rapid 13.1% pace, and is expected to continue to grow 7.5% in 2022. Continued growth in exports, mainly hi-tech, as well as some recovery in tourism are expected in 2022.
Tax revenues have grown by 25% this year, and are expected to beat expectations for 2021 and 2022. The rising tide in the housing and capital markets, as well as a bevy of hi-tech exists, contributed significantly to tax revenues, the ministry said.
The Consumer Price Index has risen by 2.5% over the past 12 months. Inflation is expected to come in at 2.8% in 2021 and 2.1% in 2022, a bit higher than previous forecasts but within the government’s targets. The strong shekel, currently trading at NIS 3.10 to the dollar, is helping to mitigate some inflationary pressures.
Separately, employment figures continue to improve, with the overall unemployment rate reaching 7% in October, compared to 7.9% in September.
The number of unemployed Israelis, excluding those on unpaid leave due to coronavirus-related reasons, improved slightly to 5.2%.
Employment figures improved quickly between April and July, when the economy started reopening but had stagnated somewhat in August and September, raising concerns about the recovery. However, it seems more likely now to attribute that hiccup to factors related to the holiday season and Delta variant fears.
There were 143,274 open job positions available in Israel in October, compared to 138,113 in September, CBS said.