This document presents the macroeconomic staff forecast formulated by the Bank of Israel Research Department in August 2020[1] concerning the main macroeconomic variables—GDP, inflation, and the interest rate.  The forecast includes two main scenarios that reflect the boundaries between the realization of an optimistic scenario and the realization of a pessimistic scenario.  In the optimistic scenario, the assumption is that control is achieved over the morbidity level, such that there are no additional significant restrictions beyond the current ones.  In the pessimistic scenario, the assumption is that control over the morbidity level is low, such that economic activity moderates as a result of additional restrictions (to the point of a formal lockdown) or through the public’s voluntary avoidance of activity in view of worsening morbidity data.  The pessimistic scenario also includes a second morbidity wave abroad.[2]


[1] The forecast was initially presented to the Monetary Committee on August 12, 2020, prior to the interest rate decision reached on August 24, 2020.

[2] These scenarios reflect a reasonable, but not absolute, range of the seriousness of the economic damage resulting from the COVID crisis.  There are certainly more pessimistic scenarios (sliding into serious closures as in the past, undermining financial stability, a continuation of the crisis resulting from the failure to find a vaccine, and more), as well as more optimistic scenarios (finding a vaccine sooner, an economy that can cross the 7–8 percent nonactivity threshold during the COVID crisis, a very rapid recovery after the crisis, and more).