In view of continued developments due to the corona crisis, the Research Department is publishing a special update to the macroeconomic forecast that was published on April 6, 2020. The projected developments according to the updated forecast are similar to those presented in the April forecast, but include data revisions and assessments in accordance with the policy measures adopted and occurrences since then.


According to the updated staff forecast, gross domestic product (GDP) is expected to contract by 4.5 percent in 2020, compared with 5.3 percent in the April forecast, and to grow by 6.8 percent in 2021, compared with 8.7 percent in the April forecast. The inflation rate in 2020 is expected to be -0.5 percent (compared with -0.8 percent in the April forecast), and in 2021, it is expected to total 0.7 percent (compared with 0.9 percent in the April forecast). The Bank of Israel interest rate in a year (the second quarter of 2021) is expected to be in the 0–0.1 percent range.


In view of the uncertainty regarding the spread or halt of the virus in the future, and in view of the policy measures taken and that are still being taken in Israel and abroad to prevent the spread of the disease and to support the recovery of the economy, this forecast is characterized by an unusual amount of uncertainty concerning the depth of the crisis, its duration, and its economic ramifications in the medium-to-long term.



In this forecast, as in the forecast published in April, special emphasis was placed on an analysis by industry in order to understand the economic impact of the crisis and of the policy measures on the economy. In particular, the forecast is based on an assessment regarding the shutdown of various industries as a result of government measures to fight the spread of the coronavirus. In addition, the Bank of Israel Research Department’s staff forecast is based on several models, various data sources, and the Bank’s DSGE (Dynamic Stochastic General Equilibrium) model developed in the Research Department—a structural model based on microeconomic foundations—which allows information from various sources to be combined into a macroeconomic forecast of real and nominal variables.