After a decline of around 4¼ per cent in 2020, GDP is projected to grow by around 2¼ per cent in 2021 and 4¼ per cent in 2022. Increased unemployment, and the likely rise in insolvencies after the second national lockdown, will weigh on the recovery of consumption and investment, despite government support to households and firms. From the second half of 2021, domestic and external demand will gain some strength as an effective immunisation against the virus is implemented. Unemployment will decline slowly but remain above pre-crisis levels at the end of 2022.
Macroeconomic policy should remain supportive and adapt to changing circumstances. The prolongation of some exceptional support measures until mid-2021 is welcome, but should be accompanied by more training and job-search assistance to help the unemployed transition to new jobs. Boosting investment in infrastructure and pre-school education can strengthen the recovery and help reduce socio-economic disparities.
Traffic congestion is a major problem in Israel. Costs of congestion are estimated at around 2% of GDP, above levels in other high-income economies. The availability of public transport is being increased to tackle the problem. However, it will take time to reap the full benefits of these investments. To provide a near term solution, an Inter-Ministerial Technical Committee is exploring the introduction of congestion charges. This report provides insights into the effectiveness of congestion charging systems and identify options that Israel could consider for the design and implementation of an effective congestion charging system. The report is the result of the work of an interdisciplinary OECD team bringing together the Centre for Tax Policy and Administration, the Economics Department, the Environment Directorate, the International Transport Forum and the Public Governance Directorate.