The Finance Ministry on Monday pegged Israel's budget deficit for the year 2020 at 160.3 billion shekels ($50.4 billion) – its highest ever. Citing the harsh economic effects of the coronavirus pandemic, the Treasury said that the deficit, which is three times higher than that of 2019, amounts to 11.7% of the country's gross domestic product.
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According to the Finance Ministry, overall, Israel's GDP only dropped by 3.3% in 2020, less than the global projection for most western economies, which was expected to be 5.5% in 2020.
Further data shows that percentage-wise, Israel's deficit is one of the highest in the world and it is expected to be surpassed only by those of the US, Canada, the UK, Iceland, and Australia.
Last week, the Bank of Israel kept its benchmark rate at an all-time low of 0.1%, saying that the country's coronavirus vaccination drive – hailed as the fastest in the world – "increases optimism that the economy can rapidly return to a path of growth in the coming year."
The central bank said that, assuming the inoculation campaign does not lose its momentum, Israel's GDP is expected to grow by 6.3% in 2021, and the unemployment rate is expected to shrink to 7.7% by the fourth quarter of 2021.
The first lockdown Israel imposed in mid-March triggered unprecedented unemployment of 26% – compared to 4% prior to the outbreak, with over a million Israelis filing for unemployment benefits. Ahead of the third lockdown, unemployment stood at 14.6%.
The Bank of Israel projected that the GDP is expected to grow by 3.5% in 2021 and the unemployment rate is expected to decline to about 11%. In 2022, GDP growth is expected to be 6%, while unemployment is expected to drop to 7%.
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