This document presents the macroeconomic staff forecast formulated by the Bank of Israel Research Department in April 2022[1] concerning the main macroeconomic variables—GDP, inflation, and the interest rate.
According to the forecast, GDP is expected to grow by 5.5 percent in 2022, and by 4.0 percent in 2023, such that in 2023, the level of GDP will develop similar to the precrisis trend. The inflation rate in the coming four quarters (ending in the first quarter of 2023) is expected to be 3.1 percent. The inflation rate in 2022 is expected to be 3.6 percent, 2 percentage points higher than in the previous forecast, and inflation in 2023 is expected to be 2 percent. According to the forecast, the monetary interest rate is expected to be 1.5 percent one year from now (in the first quarter of 2023).
The Forecast
The Bank of Israel Research Department compiles a staff forecast of macroeconomic developments on a quarterly basis. The staff forecast is based on several models, various data sources, and assessments based on economists’ judgment. The Bank’s DSGE (Dynamic Stochastic General Equilibrium) model developed in the Research Department—a structural model based on microeconomic foundations—plays a primary role in formulating the macroeconomic forecast.[2] The model provides a framework for analyzing the forces that have an effect on the economy, and allows information from various sources to be combined into a macroeconomic forecast of real and nominal variables, with an internally consistent “economic story”.
[1] The forecast was presented to the Bank of Israel Monetary Committee on April 10, 2022, prior to the decision on the interest rate made on April 11, 2022.
[2] A Discussion Paper on the DSGE model is available on the Bank of Israel website, under the title: “MOISE: A DSGE Model for the Israeli Economy,” Discussion Paper No. 2012.06.