"The Israeli economy entered the COVID-19 pandemic from a position of strength, and the authorities mounted a large and rapid response to the crisis. Timely and decisive measures introduced by the Bank of Israel at the outset of the pandemic have helped preserve market and financial stability and access to credit. Fiscal support to the health system, households, and businesses has also helped soften the economic impact of the pandemic," an optimistic review of the position of the Israeli economy published by the International Monetary Fund (IMF) today states. The report is the product of the IMF's semi-annual visit in which its analysts met the minister of finance, the governor of the Bank of Israel, and senior figures in economy. They conclude that Israel has been less hard hit economically than other countries by the coronavirus pandemic. A more comprehensive report on the Israeli economy is due to be published in a few weeks' time.
The IMF finds that the output of the Israeli economy was harmed less than that of other developed economies in 2020, and that it should recover rapidly in 2021. At the same time, its report stresses the great uncertainty about outlook for the economy because of the inability to predict how the pandemic will evolve.
The IMF report recommends that "policies should continue to provide support to the economy, contain the risks associated with the pandemic, and promote recovery." In particular, it recommends that "structural policies should aim at mitigating labor market vulnerabilities, limiting the potential long-term impact of the pandemic, and fostering a more inclusive recovery."
The IMF forecast that the Israeli economy would shrink by 5.9% in 2020, but IMF economist Iva Petrova says that this forecast is currently under review, and that the shrinkage can be expected to be substantially less. Alongside this, Petrova also estimates that in the review the growth forecast for 2021 will also be reduced - at the last update it stood at 4.9%.
In the more detailed part of the recommendations, the IMF calls on Israel to pass the 2021 state budget as a matter of urgency. "Prompt passage of a 2021 budget would help prioritize spending, position the economy for growth, and reduce economic uncertainty associated with the pandemic," the report states.
Minister of Finance Israel Katz said in response to the report, "This is further evidence of the high esteem that exists for the Israeli economy and its strength on an international comparison, and for the management of the economic crisis that broke out with the emergence of the coronavirus pandemic."
Published by Globes, Israel business news - en.globes.co.il - on November 19, 2020
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