This document presents the macroeconomic staff forecast formulated by the Bank of Israel Research Department in January 2022 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, similar to the previous
forecast. Growth in 2023 is expected to be 5.0 percent. The
inflation rate in the coming four quarters (ending in the fourth
quarter of 2022) is expected to be 1.6 percent, similar to 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 0.10/0.25 percent one year from now.
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. 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”.