Under the less likely scenario of a continued deterioration of the economy, the growth forecast is just 1.9%, it said.
Final GDP figures are not yet available for 2020, but the Finance Ministry expects to see that the economy contracted about 3.3% for the pandemic-stricken year. If that is the case, it would be less severe than the 4.15% contraction predicted by the OECD, and would beat the average decline of 5.5% among all OECD countries last year.
Israel’s economic performance was the seventh best of the 37 OECD-member countries, the report showed. China was the only OECD country to report GDP growth in 2020.Israel’s exports, which comprise a large portion of the economy, were hurt much less than expected, with exports of hi-tech services actually growing over the course of the year.
However, the report noted, the local job market got hit worse than the OECD average, as lockdowns led to declines in private consumption. Unemployment for the whole of 2020 was about 15.4%, after peaking at 36.1% in April, the Finance Ministry said. In 2021, unemployment will reach between 8.6% and 11.6%, depending on how quickly the economy can recover, the report said. In 2019, Israel recorded a record-low 3.8% unemployment.
Inflation declined by 0.6% in 2020, and the Consumer Price Index rose by 1.1%. For 2021, the Treasury expects 0.3% inflation and a 0.5% rise in the CPI.
The average salary in Israel will probably decline somewhat in 2021, from about NIS 11,500 in 2020 to NIS 11,100, the Treasury noted.