Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Israeli economy has recorded one of the best performances of the OECD countries in recent years, mainly due to an increase in the working-age population and the participation rate. After an abrupt halt due to the COVID-19 pandemic, the Israeli economy resumed its growth path in 2021 (+8.6%) and 2022 (+6.1% - IMF) thanks to buoyant private consumption (around 50% of GDP) and investment, with the resilient high-tech sector attracting venture capital. Moreover, the effects of the Russian aggression on Ukraine had a milder impact on Israel as the country is self-sufficient in natural gas, although the conflict is expected to weaken external demand in the short term. Therefore, the IMF projects growth to moderate to 3% this year and the next, as sustained inflation bites on household spending and higher interest rates drag investment.

In 2022, government fiscal spending was reduced as COVID-related measures were phased out and subsidies in agriculture eased. The strong economic performance led to an increase on the revenue side, contributing to the narrowing of the government budget, estimated at 0.6% of GDP (from 3.6% one year earlier). Nevertheless, measures taken to mitigate the increase in the cost of living will weigh on future budgets, with deficits projected at 0.9% of GDP this year and 1.6% in 2024 (IMF). The public debt-to-GDP ratio resumed a downward path, standing at 61.5% in 2022 (from 68% one year earlier, marking the sharpest decline in 35 years) with projections for a further decrease in 2023 (57.6%) and 2024 (55.7%). Consumer price inflation, at 4.5%, was lower than in most OECD countries, but still above the 1-3% target range set by the Central Bank, which raised the policy rate five times in 2022, from 0.1% to 2.75%. As the global situation normalizes, the IMF sees the inflation rate decelerating over the forecast horizon (at 3.6% this year and 2.5% in 2024), although the robust domestic demand calls for a continuation of the gradual tightening of monetary policy so as not to add to inflationary pressures. International institutions welcomed the country’s ambitious reform programme aimed at boosting infrastructure investment, reforming the vocational system and improving the business environment, as well as the measures taken to reduce tariff and non-tariff import barriers that could have a double positive impact in reducing the cost of living and spurring competition and productivity.

Israel has one of the highest living standards in the region, with salaries in line with the European average (the GDP per capita PPP was estimated at USD 52,173 in 2022 by the IMF). However, 25% of Israelis live in poverty and inequality is relatively high. Furthermore, households suffer from high real estate prices and costs of living. The Israeli labour market is tight, with a low unemployment rate (3.9% in 2022) and employment above pre-crisis levels, so that the vacancy rate has stabilised at a historically high level towards the end of the year. According to IMF estimates, the unemployment rate will decrease further to 3.8% in 2023 and 3.7% in 2024.

Foreign Trade

Israeli foreign trade represents 51% of the country's GDP (World Bank, latest data available) and exports, the backbone of the country's growth, represent about one-quarter of the country's GDP. The main goods imported by Israel include machine and electronics manufacturing  (15%), machinery and equipment (8.5%), chemical products (6.9%), and furniture and electrical equipment (5.3%). In 2022, manufacturing, mining and quarrying exports (excluding diamonds) constituted 91% of all exported goods, exports of diamonds represented 8% and the remaining 1% were agriculture, forestry and fishing exports (data CBS). A breakdown by economic activity points to a 91% increase in the exports of pharmaceutical products, with electronic components and boards rising by 31.7% compared with 2021.

In terms of geographic origin, imports came chiefly from China (13.3%), the U.S. (9%), Germany (6.6%), Switzerland (5.7%) and Turkey (5.3%); whereas exports were directed mainly towards the U.S. (by far the largest partner, accounting for 27.7% of total exports), China (6.8%), India (5.7%), the UK (4.6%), and Ireland (3.8% - data CBS 2022). Israel has a liberal import policy: in addition to the Free Trade Agreement (FTA) with the United States, Israel has FTAs with Canada, Turkey, the EU and EFTA. Furthermore, in 2022 it signed an FTA with the United Arab Emirates.

Israel’s balance of trade for goods is structurally negative, but the one of services is positive thanks to strong exports of high-tech services, such as computer consulting services, computer services and software. According to WTO’s latest data, in 2021 merchandise exports reached USD 60.1 billion (+20.9% y-o-y), while imports amounted to around USD 70 billion (+31.6%). In the same year, exports of services reached USD 71.7 billion, with imports standing at USD 32 billion (+36.8% and +20%, respectively). Thanks to the contribution of services, the World Bank estimated the country’s trade balance to be positive by 4% of GDP in 2021. According to the Israeli Statistics Office (CBS), in 2022 the trade deficit (goods only) increased by 19.6% year-on-year, as exports of goods increased by 22.8% and imports by 21.6% (to USD 66.8 and 104 billion, respectively).

COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Israel please visit the Ministry of Health’s Novel Caronavirus website, as well as the data dashboard provided by the Ministry of Health (in Hebrew).
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Israel and the current sanitary measures in vigour, please visit the official governmental portal on the Novel Caronavirus. Further information is available on the website of the Ministry of Health.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Israel Tax Authority.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Israel on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For information on the economic recovery scheme put in place by the Israeli government to address the impact of the COVID-19 pandemic on the economy, refer to the dedicated page on the website of the Ministry of Finance.
For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Israeli government to limit the socio-economic impasraelict of the COVID-19 pandemic, please consult the section dedicated to Israel in the IMF’s Policy Tracker platform.

Support plan for businesses

For information on the local business support scheme established by the Israeli government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, website of the Ministry of Finance. For news and updates, refer to the dedicated section on the official portal Gov.il.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document. You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

For the up-to-date information on possible support plans for exporters in Israel, if applicable, please consult the website of the Israel Export Institute and that of the Foreign Trade Administration.