Israel's economy is expected to grow 7.1% in 2021 and 4.7% in 2022, the Finance Ministry said on Monday in updated forecasts following a rapid recovery from the COVID-19 crisis.
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The ministry had previously projected 5.1% growth this year. Its forecasts are largely in line with the Bank of Israel's forecast of 7% this year and 5.5% in 2022.
After the economy shrank in 2020 and early in 2021, Israel in March emerged from its third coronavirus lockdown amid a rapid vaccination rollout. The economy grew 16.6% in the second quarter at an annual rate from the prior three months.
Preliminary gross domestic product data from the third quarter are due on Tuesday, with GDP expected to grow an annualized 6% according to a Reuters poll of economists.
In 2019, Israel's economy grew 3.8%.
In its updated forecasts, the ministry's economists said they took into account the latest wave of COVID-19 infections that did bring the strict restrictions in activities that the government implemented in previous waves.
Private spending, Israel's main economic growth driver, is expected to grow 13.1% this year and 7.5% next year after a drop in 2020 while exports are recovering due to resiliency in the country's high tech sector.
The ministry forecasts an inflation rate of 2.8% in 2021 and 2.1% in 2022 - within the government's annual 1-3% target. The central bank has said it saw some inflation pressures as transitory, while Israel's strong shekel was helping keep imported prices under control. read more
At the same time, tax revenues have surged 25% in 2021 and are expected to be 16.5 billion shekels ($5.3 billion) and 14 billion shekels higher than projected for 2021 and 2022, respectively.
Israeli lawmakers earlier this month approved the 2021 and 2022 state budgets, the first time a budget had been ratified in more than 3 1/2 years.
Also on Monday, the Central Bureau of Statistics said that the Consumer Price Index rose by only 0.1% in October 2021, noting the figure was well below the projected 0.4%-0.5%.
Over the past 12 months, the CPI rose by 2.3%. Since the beginning of the year, the CPI added 2.6%.
Bank of Israel Governor Professor Amir Yaron recently said that the expected inflation rate in 2021 would be close to 3% this year.
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