Israel’s government will struggle for fiscal austerity

Significance

Although the economy has rebounded, the exit from crisis mode will be complicated, not least because of a sudden increase in new COVID-19 cases in the second half of June.

Impacts

• Resurgent COVID-19 may force the government to reimpose some social distancing restrictions, weighing on economic activity.
• Segments of the country’s post-pandemic high unemployment could become chronic.
• Sharp deterioration in Israel’s debt-to-GDP ratio over 2020 will reduce fiscal space.