{
  "title": "IMF Executive Board Concludes 2020 Article IV Consultation with Israel",
  "publication": "IMF News, January 21, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/01/21/pr2119-israel-imf-executive-board-concludes-2020-article-iv-consultation",
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  "summary": "The COVID-19 pandemic \"has severely impacted Israel’s society and economy.\"",
  "publishDate": "2021-01-21",
  "sections": [
    {
      "heading": "Pandemic impact and macroeconomic developments",
      "content": "- The COVID-19 pandemic \"has severely impacted Israel’s society and economy.\"\n- Real GDP:\n  - \"real GDP still contracted by 3 percent (yoy) in the first three quarters of 2020.\"\n  - 2020 projection in tabulated \"Real GDP\" series: -4.0 (percent change).\n- Containment measures: three nation-wide lockdowns were implemented.\n- Economic resilience factors: \"the resilience of the Israeli economy, supported by its large high-tech sector.\"\n- Inflation and prices:\n  - Overall CPI (percent change, end of period): 0.4 (2016), 0.8 (2017), -0.7 (2018), 0.5 (2019).\n  - Overall CPI (percent change, average): -0.5 (2016), 0.2 (2017), -0.6 (2018).\n  - GDP Deflator (percent change, average): 1.0 (2016), 1.3 (2017), 2.2 (2018), -0.8 (2019), 1.1 (2020), 0.7 (2021)."
    },
    {
      "heading": "Policy response — fiscal, monetary, macroprudential",
      "content": "- Fiscal measures:\n  - A fiscal package of 10¼ percent of GDP for 2020 was approved by parliament.\n  - Package components: expanded health funding; benefits for unemployed and furloughed workers; grants for the self-employed; grants and loan guarantees for small and medium enterprises.\n- Monetary and financial sector measures:\n  - Central bank measures to ease financial conditions, provide liquidity, and ease access to financial services and credit, including for households and SMEs.\n  - Macroprudential and supervisory requirements were eased, \"allowing banks to utilize their capital and liquidity buffers in support of the economy.\"\n- Public finance headline figures (percent of GDP, selected):\n  - Central government revenues and grants: 26.3 (2016), 26.5 (2017), 25.5 (2018), 23.1 (2019).\n  - Central government total expenditure: 28.4 (2016), 36.5 (2017), 34.0 (2018), 31.7 (2019).\n  - Central government overall balance: -2.0 (2016), -2.9 (2017), -13.2 (2018), -9.0 (2019), -6.7 (2020).\n  - General Government overall balance: -1.4 (2016), -1.1 (2017), -3.6 (2018), -3.9 (2019), -13.3 (2020), -9.7 (2021).\n  - General Government debt: 62.1 (2016), 60.6 (2017), 60.9 (2018), 60.0 (2019), 73.0 (2020), 79.1 (2021), 81.6 (2022).\n- External and reserve indicators:\n  - Foreign reserves (eop, US$ billions): 98.4 (2016), 113.0 (2017), 115.3 (2018), 126.0 (2019), 161.3 (2020), 165.6 (2021), 169.5 (2022).\n  - Current account balance (percent of GDP): 3.1 (2016), 2.1 (2017).\n  - Gross national saving (percent of GDP): 24.4 (2016), 24.6 (2017), 23.8 (2018), 24.8 (2019), 24.7 (2020), 24.2 (2021)."
    },
    {
      "heading": "Executive Board assessment and policy guidance",
      "content": "- Commendations and general view:\n  - Directors \"commended the authorities for the appropriately rapid and large monetary and fiscal support\" which helped soften the pandemic impact.\n  - Directors \"welcomed the authorities’ efforts for early wide-spread vaccination, which could lead to a faster recovery.\"\n- Fiscal policy guidance:\n  - \"Fiscal policy should remain supportive and gradually become more targeted.\"\n  - \"Prompt adoption of the 2021 budget would help prioritize spending, position the economy for growth, and reduce economic uncertainty associated with the pandemic.\"\n  - If further downside risks materialize, \"fiscal support should be maintained beyond mid-2021.\"\n  - Once recovery is on firm ground, \"fiscal efforts will be needed to restore pre-crisis buffers and rebuild fiscal space.\"\n- Monetary policy and FX intervention:\n  - \"Monetary policy should remain accommodative.\"\n  - As inflation trends toward the target band, \"FX intervention should cease as a tool for managing inflation expectations and its use be limited to addressing disorderly market conditions.\"\n- Financial sector guidance:\n  - Israel's financial system is \"well prepared to face the impact of the pandemic.\"\n  - Banks' capital \"remains strong, with substantial capacity to face large shocks.\"\n  - Unless downside risks materialize, \"the minimum regulatory capital should not be lowered further, and structural buffers should eventually be restored.\"\n  - Efficient handling of potential increases in nonperforming loans would help limit debt overhang and spur capital reallocation.\n- Structural reform priorities:\n  - Tackle pre-COVID legacies: low productivity and high inequality.\n  - Recommendations include better funded labor activation policies, digitalization, and education reforms to strengthen marketable skills of low-skilled workers.\n  - Encouragement to complete governance reforms, \"particularly in procurement and AML/CFT.\""
    },
    {
      "heading": "Selected economic indicators and projections (2016–2022) — key series (percent change unless noted)",
      "content": "- Real Economy (percent change):\n  - Real GDP: 3.8 (2016), 3.6 (2017), 3.5 (2018), 3.4 (2019), -4.0 (2020), 4.1 (2021), 5.0 (2022).\n  - Domestic demand: 6.7 (2016), 3.9 (2017), -6.8 (2018), 6.4 (2019), 5.4 (2020).\n  - Private consumption: 3.3 (2016), 3.7 (2017), -10.0 (2018), 7.3 (2019).\n  - Public consumption: 4.2 (2016), 2.8 (2017), 2.3 (2018), 3.0 (2019).\n  - Gross capital formation: 10.4 (2016), 6.0 (2017), 2.5 (2018), -7.7 (2019), 5.6 (2020), 4.9 (2021).\n  - Gross fixed investment: 12.7 (2016), 4.6 (2017), 5.1 (2018), -9.2 (2019).\n  - Foreign demand (contribution to growth): -2.7 (2016), -0.4 (2017), 0.0 (2018), -2.1 (2019).\n- Output and labor market:\n  - Potential GDP: 1.8 (2016).\n  - Output gap (percent of potential): -0.2 (2016), 0.1 (2017), 0.6 (2018), -5.2 (2019), -4.6 (2020), -3.0 (2021).\n  - Unemployment rate (percent): 4.8 (2016), 4.0 (2017), 4.5 (2018), 5.9 (2019).\n- External position:\n  - Gross capital formation (percent of GDP): 21.1 (2016), 21.5 (2017), 21.7 (2018), 21.4 (2019), 20.6 (2020), 20.7 (2021).\n  - Foreign saving (percent of GDP): -3.3 (2016), -3.1 (2017), -3.4 (2018), -3.7 (2019), -3.5 (2020).\n- Exchange rate and competitiveness:\n  - NIS per U.S. dollar (period average): 3.84 (2016), 3.60 (2017), 3.56 (2018), 3.45 (2019).\n  - Nominal effective exchange rate (2005=100): 111.3 (2016), 118.7 (2017), 123.2 (2018), 125.5 (2019).\n  - Real effective exchange rate (2005=100): 103.3 (2016), 108.1 (2017), 108.6 (2018), 109.1 (2019).\n  - Terms of trade (2010 = 100): 108.2 (2016), 104.6 (2017), 95.3 (2018), 98.7 (2019), 101.9 (2020), 100.4 (2021), 100.5 (2022).\n\nSource: IMF Executive Board concluding statement, \"IMF Executive Board Concludes 2020 Article IV Consultation with Israel\", January 21, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Israel and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/01/21/pr2119-israel-imf-executive-board-concludes-2020-article-iv-consultation"
    }
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    "Published: January 21, 2021",
    "The COVID-19 pandemic \"has severely impacted Israel’s society and economy.\"",
    "Real GDP:",
    "Containment measures: three nation-wide lockdowns were implemented.",
    "Economic resilience factors: \"the resilience of the Israeli economy, supported by its large high-tech sector.\"",
    "Inflation and prices:",
    "Fiscal measures:",
    "Monetary and financial sector measures:",
    "Public finance headline figures (percent of GDP, selected):",
    "External and reserve indicators:",
    "Commendations and general view:",
    "Fiscal policy guidance:",
    "Monetary policy and FX intervention:",
    "Financial sector guidance:",
    "Structural reform priorities:",
    "Real Economy (percent change):",
    "Output and labor market:",
    "External position:",
    "Exchange rate and competitiveness:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Israel and the IMF](http://www.imf.org/external/country/ISR/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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