The OECD's latest economic forecast sees Israel's economy contracting 4.25% in 2020, with only 2.25% growth in 2021 and 4.25% growth in 2022. While the expected contraction this year is in line with Bank of Israel and Ministry of Finance forecasts, both are predicting 5% growth next year.
In explaining its forecast, the OECD says, "Growing unemployment and the likelihood of a rise in insolvency cases following the second lockdown will weigh on the recovery in consumption and in investments despite government support for households and businesses."
The OECD's forecast takes into account a slower recovery of the economy from the second lockdown than from the first. The OECD sees external demand and exports picking up in the second half of 2021 when the impact of the Covid-19 vaccination begins to take effect. Unemployment will continue falling but will remain at higher levels that before the crisis through to the end of 2022.
The OECD writes, "Macroeconomic policies must remain supportive and prepared for changing circumstances. Extending exceptional supportive means through to mid-2021 would be most welcomed and received but must also be back up by training and assistance seeking employment that will help the unemployed move to new jobs. Increased investment in infrastructures and early childhood education can strengthen the recovery and help in reducing socio-economic gaps."
Published by Globes, Israel business news - en.globes.co.il - on December 1, 2020
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