Photo Credit: Flash90
Cleanup crew disinfects a bank ATM in Ramat Gan, June 3, 2020.

The Bank of Israel’s weekly indicators point to a rapid recovery of the economy, with a 6% increase in credit card purchases in the last week and a 31% increase since mid-February when the lockdown and other restrictions started to be removed. The levels of road traffic from home to work also continue to rise, but remain at 80% of normal traffic before the pandemic due to the high unemployment and more individuals working from home.

The Bank of Israel is the central bank of Israel, tasked with maintaining the stability of the financial system in Israel, including the stability of consumer prices. It also administers and implements monetary policy in Israel, conducts foreign exchange operations, takes care of the foreign reserves to protect the viability and competitiveness of the country’s economy, and supervises and regulates the banking system and the operations of the financial market infrastructure. The Bank of Israel also has the exclusive right to issue Israeli Shekel banknotes and coins.

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According to Israel Hayom (בנק ישראל: הנתונים מגלים – המשק מתאושש במהירות), Israeli economists forecast a continued rise of the economy, and a drop in the deficit, so that by the end of 2021, the Israeli economy will grow by 5.3% compared to 2020, and the deficit will fall by about 7%.

In January, exports by Israeli high-tech companies jumped by 9.6% compared to December (seasonally adjusted) and increased by 7% compared to the average of the last quarter of 2020. The high-tech sector grew by 19% in 2020 and constitutes 8.8% of the total GDP. This rapid expansion in high-tech exports contributed to an improvement in the government’s tax revenues, most notably an increase in capital gains tax, but also to the continued appreciation in the shekel, which is expected to continue.

That rise of the value of the shekel explains the weakness of Israel’s industry, which is evident from the Purchasing Managers’ Index (PMI), which fell by 0.1 points in February to 49.4, with weak export orders (43.2 points).

The country’s unemployment rate fell to 15.4%, but according to Leader Capital Market, the unemployment data will not come down significantly until the repeal or amendment of the unemployment payments to Israelis who lost their jobs because of the pandemic and now prefer those benefits to seeking work.

Inflation is expected to rise slightly, with the indices of the coming months being relatively high, mainly due to seasonal increases, but also due to rising fuel prices following disruptions in the world’s oil supply over the temporary blocking of the Suez Canal.

Leader Capital Market expects the rapid recovery to result in the Bank of Israel taming its involvement in the bond and the foreign exchange markets, albeit gradually. But should the value of the shekel continue to rise against the dollar and other coins, the bank will likely continue its policy of purchasing billions of dollars to preserve the competitiveness of Israeli exports.

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David writes news at JewishPress.com.