{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Israel",
  "publication": "IMF News, June 15, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/06/14/pr23209-israel-imf-executive-board-concludes-2023-article-iv-consultation-with-israel",
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  "summary": "Israel’s impressive economic performance continued in 2022. GDP increased 6.5 percent in 2022, led by domestic demand, with an increase in investment and consumption and with a minimal contribution from the government, as fiscal consolidation gained pace.",
  "publishDate": "2023-06-15",
  "sections": [
    {
      "heading": "Summary of 2022 performance",
      "content": "- Real GDP increased 6.5 percent in 2022, led by domestic demand with increases in investment and consumption and a minimal contribution from the government as fiscal consolidation gained pace.\n- Debt-to-GDP ratios fell to about 61 percent in 2022, down from about 71 percent during the Pandemic.\n- Inflation remained high, at about 5 percent by end 2022, with the Central Bank of Israel following a tightening monetary policy.\n- External demand was negative on net, as imports outgrew exports."
    },
    {
      "heading": "Near-term outlook and projections",
      "content": "- Staff projects real GDP growth to slow to about 2.5 percent in 2023 as households’ purchasing power moderates and firms rein in investment.\n- Growth is expected to recover from 2024 and converge toward potential, with potential GDP estimated at about 3.8 percent and the output gap closing in the medium term.\n- The labor market is expected to remain tight and the unemployment rate is expected to marginally increase.\n- Public debt-to-GDP is projected to decrease further and stay below 60 percent.\n- The external sector is projected to remain robust."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors commended Israel’s remarkable economic performance and strong external position.\n- Given downside risks, Directors recommended policies focused on:\n  - Protecting fiscal buffers.\n  - Reducing inflation.\n  - Maintaining macro-financial resilience.\n  - Enhancing potential growth.\n- Directors cautioned that the uncertainty created by the proposed judicial reform could have a negative impact on the economy and called for a politically sustainable solution; they noted the importance of maintaining the strength of the rule of law.\n- Fiscal policy:\n  - Generally seen as appropriate.\n  - Raising growth-enhancing spending in education and infrastructure should be accompanied by additional revenue measures to protect fiscal buffers.\n  - Strengthen the fiscal framework, including improving budgetary planning and considering establishment of a fiscal council.\n- Monetary policy:\n  - Commended the Bank of Israel’s tight monetary policy stance given elevated inflation and a tight labor market.\n  - Monetary policy should remain tight until clearer signs that aggregate demand is cooling.\n  - Central bank readiness to tighten further if needed was welcomed.\n  - Market forces should be allowed to set the price of the shekel; foreign exchange interventions should be limited to addressing disorderly market conditions.\n- Financial sector and macroprudential policy:\n  - Banking system remains broadly robust, but close monitoring of risks—particularly those related to real estate lending—is needed.\n  - Welcome tightening of macroprudential policies and encourage measures to raise housing supply.\n  - Further improvements to supervisory and AML/CFT frameworks are important.\n- Structural reforms:\n  - Enhance potential growth and address inequality by closing skill gaps, improving infrastructure, and increasing competition.\n  - Education reforms and active labor market policies to better integrate minorities.\n  - Reduce barriers to product market competition to address rising cost of living concerns.\n  - Advance climate agenda commitments to reduce greenhouse gas emissions and adapt to climate change impacts."
    },
    {
      "heading": "Key statistics and selected indicators (as presented)",
      "content": "- Real GDP growth:\n  - 2018: 4.1\n  - 2019: 4.2\n  - 2020: -1.9\n  - 2021: 8.6\n  - 2022: 6.5\n  - 2023 (projection): 2.5\n  - 2024 (projection): 3.4\n  - 2025 (projection): 3.6\n  - 2026 (projection): 3.7\n  - 2027 (projection): 3.8\n- Domestic demand (selected): 2022: 7.4; 2023 (projection): 3.9\n- Gross fixed investment (selected): 2022: 9.0; 2023 (projection): 0.9\n- Output gap (percent of potential): 2022: 0.1; 2023: 0.0\n- Unemployment rate (percent): 2018: 4.3; 2019: 5.0\n- Overall CPI (percent change, average):\n  - 2018: 0.8\n  - 2019: -0.6\n  - 2020: 1.5\n  - 2021: 4.4\n  - 2022: 3.5\n  - 2023 (projection): 2.1\n- Overall CPI (percent change, end of period): 2018: -0.7; 2021: 5.3; 2022: 2.9\n- Gross national saving (percent of GDP): 2022: 29.7; 2023 (projection): 29.6\n- Foreign saving (percent of GDP): 2022: -4.1; 2023 (projection): -3.8\n- Gross capital formation (percent of GDP): 2022: 25.8; 2023 (projection): 25.9\n- Central government revenues and grants (percent of GDP): 2022: 26.7; 2023 (projection): 24.6\n- Central government total expenditure (percent of GDP): 2022: 25.3; 2023 (projection): 25.7\n- Central government overall balance (percent of GDP): 2018: -2.9; 2019: -11.3; 2020: -4.4; 2021: -0.9; 2022: -2.2; 2023 (projection): -2.3; 2024 (projection): -2.4\n- General government debt (percent of GDP):\n  - 2018: 59.9\n  - 2019: 58.8\n  - 2020: 70.6\n  - 2021: 68.0\n  - 2022: 61.0\n  - 2023 (projection): 57.9\n  - 2024 (projection): 55.7\n  - 2025 (projection): 55.0\n  - 2026 (projection): 54.7\n  - 2027 (projection): 54.6\n  - 2028 (projection): 54.5\n- Foreign currency external debt (percent of GDP) (selected): 2018: 8.4; 2019: 11.3; 2022: 6.1; 2023 (projection): 5.7\n- Current account and trade (selected):\n  - Exports of goods and services (percent of GDP): 2022: 28.5; 2023 (projection): 28.2\n  - Imports of goods and services (percent of GDP): 2022: 28.6; 2023 (projection): 24.5\n- Foreign reserves (end of period, US$ billions):\n  - 2019: 126.0\n  - 2020: 173.3\n  - 2021: 213.0\n  - 2022: 194.2\n  - 2023 (projection): 198.7\n  - 2024 (projection): 207.6\n  - 2025 (projection): 216.8\n  - 2026 (projection): 226.3\n  - 2027 (projection): 237.1\n  - 2028 (projection): 248.9\n- NIS per U.S. dollar (period average): 2018: 3.59; 2019: 3.56; 2020: 3.44; 2021: 3.23; 2022: 3.36\n\nIMF Communications Department, June 15, 2023 — Press Release No. 23/209\n\n---\n\n\n References\n\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/2023/06/14/pr23209-israel-imf-executive-board-concludes-2023-article-iv-consultation-with-israel"
    }
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    "Published: June 15, 2023",
    "Real GDP increased 6.5 percent in 2022, led by domestic demand with increases in investment and consumption and a minimal contribution from the government as fiscal consolidation gained pace.",
    "Debt-to-GDP ratios fell to about 61 percent in 2022, down from about 71 percent during the Pandemic.",
    "Inflation remained high, at about 5 percent by end 2022, with the Central Bank of Israel following a tightening monetary policy.",
    "External demand was negative on net, as imports outgrew exports.",
    "Staff projects real GDP growth to slow to about 2.5 percent in 2023 as households’ purchasing power moderates and firms rein in investment.",
    "Growth is expected to recover from 2024 and converge toward potential, with potential GDP estimated at about 3.8 percent and the output gap closing in the medium term.",
    "The labor market is expected to remain tight and the unemployment rate is expected to marginally increase.",
    "Public debt-to-GDP is projected to decrease further and stay below 60 percent.",
    "The external sector is projected to remain robust.",
    "Directors commended Israel’s remarkable economic performance and strong external position.",
    "Given downside risks, Directors recommended policies focused on:",
    "Directors cautioned that the uncertainty created by the proposed judicial reform could have a negative impact on the economy and called for a politically sustainable solution; they noted the importance of maintaining the strength of the rule of law.",
    "Fiscal policy:",
    "Monetary policy:",
    "Financial sector and macroprudential policy:",
    "Structural reforms:",
    "Real GDP growth:",
    "Domestic demand (selected): 2022: 7.4; 2023 (projection): 3.9",
    "Gross fixed investment (selected): 2022: 9.0; 2023 (projection): 0.9",
    "Output gap (percent of potential): 2022: 0.1; 2023: 0.0",
    "Unemployment rate (percent): 2018: 4.3; 2019: 5.0",
    "Overall CPI (percent change, average):",
    "Overall CPI (percent change, end of period): 2018: -0.7; 2021: 5.3; 2022: 2.9",
    "Gross national saving (percent of GDP): 2022: 29.7; 2023 (projection): 29.6",
    "Foreign saving (percent of GDP): 2022: -4.1; 2023 (projection): -3.8",
    "Gross capital formation (percent of GDP): 2022: 25.8; 2023 (projection): 25.9",
    "Central government revenues and grants (percent of GDP): 2022: 26.7; 2023 (projection): 24.6",
    "Central government total expenditure (percent of GDP): 2022: 25.3; 2023 (projection): 25.7",
    "Central government overall balance (percent of GDP): 2018: -2.9; 2019: -11.3; 2020: -4.4; 2021: -0.9; 2022: -2.2; 2023 (projection): -2.3; 2024 (projection): -2.4",
    "General government debt (percent of GDP):",
    "Foreign currency external debt (percent of GDP) (selected): 2018: 8.4; 2019: 11.3; 2022: 6.1; 2023 (projection): 5.7",
    "Current account and trade (selected):",
    "Foreign reserves (end of period, US$ billions):",
    "NIS per U.S. dollar (period average): 2018: 3.59; 2019: 3.56; 2020: 3.44; 2021: 3.23; 2022: 3.36",
    "[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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