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Israel GDP is projected to grow by 2.9% in 2023 and 3.3% in 2024. Elevated inflation will weigh on private consumption growth and exports will be held back by moderate demand growth in trading partners. The increase in interest rates will slow investment growth. Growth is projected to pick up towards its potential rate in 2024 as inflation abates. Risks are skewed to the downside, related to high global uncertainty and domestic political tensions. Tight monetary conditions should be maintained to bring inflation back to the target range. Fiscal policy should avoid adding to demand and inflationary pressures, and support to mitigate rising costs of living should become more targeted. Reforms to reduce import barriers and spur competition should continue. Labour market and educational reforms are needed to address demographic challenges and reduce wide labour market disparities. Economic activity is moderating but remains robust GDP growth moderated in the first quarter of 2023, but remained robust at 2.5% at an annualised quarterly rate. Private consumption contracted but private investment growth was strong. Business confidence has weakened but remains positive. Activity in the housing market continues to moderate, with the number of housing transactions declining. Capital raised by high-tech firms has declined considerably compared to the high levels in 2021 and early 2022. The shekel has depreciated in the first five months of the year and the stock market has markedly underperformed global indices. The labour market remains tight despite some recent easing. The job vacancy rate continues to decline, especially in the high-tech sector, but is still above pre-pandemic levels. Consumer price inflation, at 5% in April 2023, is above the 1-3% central bank target range and is broad based. Inflation of tradables has slowed, but housing and service inflation is persistent. One-year ahead inflation expectations hover around 3%.
Israel
1. Shaded area is the Bank of Israel's inflation target range (i.e. 1-3%). Source: Israel Central Bureau of Statistics; Bank of Israel; and OECD calculations. StatLink 2 https://stat.link/m04h5a
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023