Israel: Modest upturn

Recession is now under way, due largely to high exposure to international trade, but it is being tempered by the relatively mild difficulties in domestic financial markets and the absence of a house-price bubble.

The banking sector has not experienced serious difficulties, largely because of limited exposure to toxic assets. Growth will only turn modestly positive at the end of this year.

The new government has made a commitment to limit cyclical increases in the budget deficit. The spending rule should be maintained for immediate budgeting purposes (even though it could later be improved), but ambitions for further income-tax cuts should be curtailed. As conditions normalise, monetary policymakers should re-establish business-as-usual inflation targeting by terminating quantitative easing and intervention in the foreign-exchange market.

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©OECD Observer No 274, July 2009

Economic data

GDP growth: -1.8% Q1 2020/Q4 2019
Consumer price inflation: 0.9% Apr 2020 annual
Trade (G20): -4.3% exp, -3.9% imp, Q1 2020/Q4 2019
Unemployment: 8.4% Apr 2020
Last update: 9 July 2020

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