IMF Staff Country Reports

This 2023 Article IV Consultation discusses that Israel’s impressive economic performance continued in 2022. Economic activity is expected to decelerate in 2023, and thereafter converge toward its potential. IMF staff projects economic growth to slow to about 2.5 percent in 2023, as households’ purchasing power moderates and firms rein in investment. The labor market is expected to remain tight and the unemployment rate is expected to marginally increase. Fiscal buffers are expected to be maintained as public debt to gross domestic product is projected to decrease further and stay below 60 percent. The external sector is projected to remain robust. As domestic demand starts recovering from 2024, the growth rate is anticipated to converge toward its potential rate, estimated at about 3.8 percent; thus, closing the output gap in the medium term. In order to enhance potential growth, authorities must prioritize education reform and infrastructure investment. Improving the skills of minorities will foster an inclusive economy. Improving local transportation infrastructure is key to reducing congestion, improving job accessibility, and alleviating cost of living concerns.