Israel’s Gross Domestic Product (GDP) grew by 8.1% in 2021, surpassing previous forecasts and marking the highest financial growth rate recorded in Israel in 21 years, according to data published by the Central Bureau of Statistics on Wednesday.
According to the data, the fourth fiscal quarter of 2021 saw a staggering 16.6% growth in GDP, bringing the yearly average to 8.1%, the highest since 2000, when Israel’s growth rate stood at 8.4%.
The Bank of Israel had estimated that the growth rate would reach 6.5% in 2021. More optimistic estimations, made by experts in the Finance Ministry, pointed to a 7.1% growth, according to the business news outlet Calcalist.
Finance Minister Avigdor Liberman was quick to take credit for the impressive figures, claiming the coalition’s policy of keeping Israel’s economy open despite the pandemic led to the economic growth.
“The policy I’ve promoted of ‘living alongside the coronavirus’ with no lockdowns, no unpaid vacations, and passing a revolutionary budget, have allowed us to break records and surpass all forecasts, leading the State of Israel to the first place in growth among Western countries,” Liberman tweeted.
Israel’s GDP per capita marked an impressive growth in 2021 as well. With Israel’s population growing by 1.7% in 2021, GDP per capita grew by 6.3%.
That figure was 1.3% higher than the estimated average growth of 5% in OECD countries, the Central Bureau of Statistics said.
The import of goods and services grew by 18.7% in 2021, while the export of goods and services grew by 13.6%. Private consumption grew by 11.7%.
Most of the financial growth took place during the last quarter of 2021. For comparison, Israel’s GDP grew by only 2.4% in the third quarter of 2021.
According to Liberman, this reflects Israel’s new COVID policy of keeping the economy as open as possible, which was spearheaded by Prime Minister Naftali Bennett’s government and started coming into effect in October.
When presenting his government’s model of battling COVID in September of last year, Bennett cited “an economic price, a physical price and an emotional price” the country paid “for bringing life to a standstill in 2020.”
In 2020, as the country was gripped by repeated lockdowns and restrictions on gathering and traveling, Israel’s GDP shrunk by 2.2%. The GDP per capita shrunk by 3.9% in 2020, according to CBS.
The notable growth rate could also be seen as the partial result of the Knesset in November passing the first state budget in nearly three years in a major accomplishment for Bennett’s coalition.
The passing of the state budget led to a 17.3% increase in governmental expenditure on public services, according to the Central Bureau of Statistics.
Despite the strong economy, the government still faces major financial challenges and mounting public pressure on some fronts.
Data released by the Central Bureau of Statistics on Tuesday indicated a rise in consumer goods and housing prices in Israel in the past 12 months, adding on to years of steady price hikes in Israel.
According to the data, the consumer price index, which measures the price of an average market basket of consumer goods, has risen by 0.2% in January and by 3.1% in the past year.
Housing prices marked a more dramatic increase — 11.3% in 12 months.
In an attempt to curb the price hikes, which have made economic difficulties brought on by the pandemic more acute, the government has presented a plan aimed at tackling the rising cost of living. The plan’s outline, however, has been criticized for benefiting some groups more than others.
The leader of the opposition Haredi party Shas, Aryeh Deri, has called the plan a “charade meant to decrease public pressure,” arguing it “includes confusing steps meant to benefit ‘good families’ only — a codename for the continued discrimination and intentional harm to periphery communities.”
Blue and White coalition party MK Michael Biton, chairman of the Knesset’s Economic Affairs Committee, said last week the plan did not cover small businesses or self-employed workers who suffered heavy financial losses during the COVID pandemic.
“You can’t help only salaried employees and not them,” he said.
Coming under fire on Tuesday for halting last year all grants to business owners and self-employed workers impacted by COVID, Liberman vowed to “not leave anyone behind,” saying the Finance Ministry will be presenting a plan to provide self-employed workers in Israel with a financial safety net to be implemented within a few weeks.