Panorama econòmic

Economic indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Israeli economy has recorded one of the best performances of the OECD countries in recent years, mainly due to an increase in the working-age population and the participation rate. After an abrupt halt due to the COVID-19 pandemic, the Israeli economy resumed its growth path in 2021 (+8.6%) and 2022 (+6.1% - IMF) thanks to buoyant private consumption (around 50% of GDP) and investment, with the resilient high-tech sector attracting venture capital. Moreover, the effects of the Russian aggression on Ukraine had a milder impact on Israel as the country is self-sufficient in natural gas, although the conflict is expected to weaken external demand in the short term. Therefore, the IMF projects growth to moderate to 3% this year and the next, as sustained inflation bites on household spending and higher interest rates drag investment.

In 2022, government fiscal spending was reduced as COVID-related measures were phased out and subsidies in agriculture eased. The strong economic performance led to an increase on the revenue side, contributing to the narrowing of the government budget, estimated at 0.6% of GDP (from 3.6% one year earlier). Nevertheless, measures taken to mitigate the increase in the cost of living will weigh on future budgets, with deficits projected at 0.9% of GDP this year and 1.6% in 2024 (IMF). The public debt-to-GDP ratio resumed a downward path, standing at 61.5% in 2022 (from 68% one year earlier, marking the sharpest decline in 35 years) with projections for a further decrease in 2023 (57.6%) and 2024 (55.7%). Consumer price inflation, at 4.5%, was lower than in most OECD countries, but still above the 1-3% target range set by the Central Bank, which raised the policy rate five times in 2022, from 0.1% to 2.75%. As the global situation normalizes, the IMF sees the inflation rate decelerating over the forecast horizon (at 3.6% this year and 2.5% in 2024), although the robust domestic demand calls for a continuation of the gradual tightening of monetary policy so as not to add to inflationary pressures. International institutions welcomed the country’s ambitious reform programme aimed at boosting infrastructure investment, reforming the vocational system and improving the business environment, as well as the measures taken to reduce tariff and non-tariff import barriers that could have a double positive impact in reducing the cost of living and spurring competition and productivity.

Israel has one of the highest living standards in the region, with salaries in line with the European average (the GDP per capita PPP was estimated at USD 52,173 in 2022 by the IMF). However, 25% of Israelis live in poverty and inequality is relatively high. Furthermore, households suffer from high real estate prices and costs of living. The Israeli labour market is tight, with a low unemployment rate (3.9% in 2022) and employment above pre-crisis levels, so that the vacancy rate has stabilised at a historically high level towards the end of the year. According to IMF estimates, the unemployment rate will decrease further to 3.8% in 2023 and 3.7% in 2024.

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