The economy was less affected than the OECD average in the Corona crisis Israel today

According to a report by the Ministry of Finance, the Israeli economy is expected to shrink by 3.3% in 2020 • The reasons: an increase in high-tech investments and a slight blow to exports

• High-tech in Israel.

  One of the reasons for the low economic contraction relative to the OECD

  Photography: 

  Reuters / Archive

The Israeli economy has been hit by the corona to a lesser extent than the OECD average, according to a new report by the Ministry of Finance published today (Sunday).

According to a macro team forecast in the Chief Economist Division, Israel's economy is expected to contract by 3.3% in 2020, compared with the OECD's forecast of a contraction of 4.15% relative to the Israeli economy, and an average of 5.5% in OECD countries.

It should be noted that the current forecast is better than the previous forecast of the Treasury in November, which predicted a contraction of 4.2-4.8 percent in the past year.

The Ministry of Finance explained the relatively small damage to the Israeli economy compared to the world, with only a slight damage to exports, which is a significant component of the domestic product, and the prosperity experienced by the technology sector, including increased exports of high-tech services and foreign investment.

On the other hand, the negative effects of the crisis were felt more strongly in the labor market, along with the contraction in private consumption.

These areas were more affected than their counterparts in OECD countries.

Regarding 2021, the Treasury estimated that the economy will grow by 4.6%, similar to the November forecast (4.5%).

In the pessimistic scenario of worsening health conditions due to ineffectiveness of vaccines, the economy will grow by only 1.9%.

However, the Treasury explained that this is a scenario with a low probability.

Israel reached the corona crisis in a relatively good economic situation, the Treasury noted, with a low unemployment rate (3.4%) and a high employment rate (about 80%).

It was also stated that the debt-to-GDP ratio in 2019 stood at 60% alongside a relatively high structural deficit.

In 2019, the Israeli economy grew at a rate of 3.4% similar to the rate of growth in 2018, and slightly higher than the potential growth rate of the economy.

Thanks to the relatively low level of public debt and despite the high structural deficit of NIS 160 billion, the State of Israel had the fiscal space to implement an expansionary policy to deal with the crisis.