The Israeli economy shrank by 2.4 percent in 2020 due to the coronavirus pandemic, figures released by the Central Bureau of Statistics Tuesday showed.
The figures represent the first contraction of the economy over a year since a marginal drop in 2002, as increased unemployment and a likely rise in insolvencies after the latest national lockdown weigh on economic recovery.
But the data is nonetheless better than expected, with economic officials having predicted a contraction of at least 3.3%-4.6%. And it was far better than the 5.5% average contraction in OECD countries last year.
Despite the fall, the Bank of Israel expects a comeback in 2021, with as much as 6.3% growth if the country’s vaccination drive is successful.
Four million Israelis, or some 44 percent of the country’s total population, have now received the first dose of a coronavirus vaccine, the Prime Minister’s Office announced Tuesday.
But with new virus cases still remaining above 5,000 a day, some restrictions from a third national lockdown remain in place, limiting businesses and affecting unemployment numbers.
During the first outbreak of the virus in the spring, unemployment figures issued by the Employment Service spiked as 800,000 people quickly lost work in Israel’s initial lockdown.
They have since fluctuated as the country has moved in and out of restrictions and closures.
The government has provided unemployment stipends to those who lost their jobs, as well as periodic grants to independent businesses, but many have said that these allowances are woefully insufficient to cover their everyday needs and soaring expenses.
Pandemic-related spending pushed Israel’s government deficit to a record high of 11.7% of GDP in 2020, and experts expect the deficit to remain high in 2021, at about 9% of GDP.
Additionally, a government budget is unlikely to be adopted before the third quarter of 2021, after Israel holds its fourth election in two years in March. Until then, spending will be constrained by a limit of 1/12th of the 2019 budget each month, to which COVID-19-related cash expenditures of about 3% of GDP, adopted in 2020, will be added.