Israel's fiscal deficit as a proportion of GDP will climb to 11% this year, placing it third among the OECD countries, after the US and Canada, according to an updated forecast released by Ministry of Finance Chief Economist Shira Greenberg.
The ratio of Israel's government debt to GDP will nevertheless remain below the OECD average, since Israel entered the economic crisis precipitated by the coronavirus pandemic with a debt:GDP ratio at an all-time low.
The Ministry of Finance expects the Israeli economy to contract by 5.4%, a projection similar to that of the Bank of Israel, which forecast a 5.3% contraction. This forecast is still however predicated on an optimistic scenario of a rapid V-shaped recovery from the downturn, as happened in the global economy in 2009, starting from the second half of this year.
The Ministry of Finance also has a more pessimistic forecast based on the assumption of a slow, U-shaped recovery taking years, as happened after the dot.com market collapse and the second intifada at the beginning of the 2000s. In this scenario, the Israeli economy will contract by 6.5% this year.
On unemployment this year, the Ministry of Finance document says, "Under the scenarios presented, the average rate will be 13-14% including furloughed workers, or 8-9% according to the definition of the Central Bureau of Statistics (which does not count furloughed workers as unemployed).
Published by Globes, Israel business news - en.globes.co.il - on April 26, 2020
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