Research Department Staff Forecast, January 2020

09/01/2020
All Press Releases In Subject:
The Economy and Economic Activity
       Abstract

This document presents the forecast of macroeconomic developments compiled by the Bank of Israel Research Department in January 2020 regarding the main macroeconomic variables—GDP, inflation and the interest rate. According to the staff forecast, gross domestic product (GDP) is projected to increase by 2.9 percent in 2020, slightly lower than the previous forecast, and by 3.2 percent in 2021. The inflation rate in 2020 is expected to be 1.0 percent, lower than the previous forecast, and to be 1.4 percent in 2021. According to the forecast, the Bank of Israel interest rate in one year is expected to be 0.25 percent or 0.1 percent.

 

Forecast

The Bank of Israel Research Department compiles a staff forecast of macroeconomic developments on a quarterly basis. The staff forecast is based on several models, various data sources, and assessments based on economists’ judgment. The Bank’s DSGE (Dynamic Stochastic General Equilibrium) model developed in the Research Department—a structural model based on microeconomic foundations—plays a primary role in formulating the macroeconomic forecast. The model provides a framework for analyzing the forces that have an effect on the economy, and allows information from various sources to be combined into a macroeconomic forecast of real and nominal variables, with an internally consistent “economic story”.