Economic Trends

According to the International Monetary Fund’s forecast, for the year, 2013, the Israeli economy is expected to expand 2.9% this year and 3.2% next year – a faster growth rate than most developed Western countries (Israel’s growth rate totalled 4.7% in 2011). The forecast was delivered on September 2012 in Tokyo at the Annual Meetings of the IMF and the World Bank Group, attended by finance ministers and central bank governors from 200 countries.

The annual inflation rate in Israel is expected to remain low, at around 2%, and the unemployment rate will remain 7%. The government’s budget deficit, according to the IMF forecast, will stand at 3.5% of GDP and will drop to 3.3% next year. Moreover, the Israeli government’s budget deficit is expected to fall to 2.5% of GDP in 2015.

For the sake of comparison, the American and British budget deficits are expected to remain 4.5% of those countries GDPs.

As a result of the improvement in Israel, IMF economists see an additional relaxation in the debt-to-GDP ratio, which is expected to drop to 73% next year, to 72% in 2014 (lower than the forecast for Germany’s debt-to-GDP ratio), and to only 67% in five years.

In the US, the debt-to-GDP ratio is expected to increase to 112% next year and reach 114% in the following years.

Israel stands out in the charts accompanying the IMF’s fiscal policy review as a country which was unusually successful in reducing the government debt during the crisis, as opposed to the global trend.

The forecast depends on the performance of most fiscal policies the governments have committed to so far, including the Israeli government. The forecast does not take into account any political or security-related developments, which may affect the economy in both directions.