As is the case elsewhere, the COVID-19 pandemic has taken a severe toll on the Jewish state’s economy, shrinking the GDP by 3.7 percent in 2020 and sending the unemployment rate up to 34.7 percent during the first lockdown. Still, the economic contraction is smaller than what the government experts had predicted last fall, vaccination is proceeding at steady rate, and the second lockdown (September-October of last year) took a less dire toll. The Jewish state is not, however, out of the clear by any measure: a third lockdown went into effect in December, and the ongoing political instability means that the country won’t have a 2021 budget until after the March election. Shlomo Even writes:
Now, with the third closure, there has been an increase in widespread unemployment. The most serious damage in this crisis is to employment in the tourism, trade, and leisure and entertainment industries and in small businesses, which suffer particularly due to lockdowns. During 2020, more than 70,000 small businesses were closed. Action must now be taken to prevent the closure of sound businesses just before the recovery phase.
Unemployment will remain high even after the pandemic subsides. According to the Bank of Israel’s forecast, [even] in a scenario of rapid vaccination, the broad unemployment rate will stand at 7.7 percent in the last quarter of 2021.
[E]conomic-social recovery depends first of all on the decline of the coronavirus. Given rapid vaccination, forecasts indicate GDP growth in 2021 at a rate of 4.5-6.3 percent. This is of course presumes there will be no exceptional events, such as the spread of a mutation that is immune to the vaccine. Israel will also be affected by growth in the world economy.
In the process of emerging from the crisis, reducing unemployment must be given first priority. . . . In [trying to do so], the government must seize opportunities to work for the long-term development of the labor market, with the aim of raising the employment rate and labor productivity, especially in the ultra-Orthodox and Arab sectors (which together make up about 32 percent of the population), and in the periphery. This effort, necessary for stable long-term growth, requires cultural and budgetary changes, and many years.
Read more on Institute for National Security Studies: https://www.inss.org.il/publication/israeli-economy/