BOI-Research Department Staff Forecast, January 2022.
ENPNewswire-January 4, 2022--BOI-Research Department Staff Forecast, January 2022
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Release date- 03012022 - This document presents the macroeconomic staff forecast formulated by the Bank of Israel Research Department in January 2022[1] concerning the main macroeconomic variables-GDP, inflation, and the interest rate.
According to the forecast, GDP is expected to grow by 5.5 percent in 2022, similar to the previous forecast. Growth in 2023 is expected to be 5.0 percent. The inflation rate in the coming four quarters (ending in the fourth quarter of 2022) is expected to be 1.6 percent, similar to the previous forecast, and inflation in 2023 is expected to be 2 percent. According to the forecast, the monetary interest rate is expected to be 0.10/0.25 percent one year from now.
The 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.[2] 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'.
a. The global environment
Our assessments of expected developments in the global economy are based mainly on projections by international institutions (the International Monetary Fund and the OECD) and foreign investment houses. In view of the assessment that the delays in the global supply chains will last until the second half of 2022, the forecast for growth of imports to advanced economies in 2022 was lowered to 5.0 percent, and the forecast for 2023 is for growth of 4.5 percent. Accordingly, we assume that GDP growth in the advanced economies will be slightly more moderate than in our previous forecast-3.9 percent in 2022 and 2.5 percent in 2023. The inflation rate in the advanced economies is forecast to be 4.4 percent in 2022 and 3.1 percent in 2023-higher than in the previous forecast, in view of the perception that the increase in inflation is less temporary. Accordingly, the average interest rate of the central banks is expected to increase slightly more than in the previous forecast, to about 0.3 percent by the end of 2022 and 0.6 percent at the end of 2023. The average price of Brent oil was about $79 per barrel in the fourth quarter, about 9 percent higher than the average price in the third quarter.
b. Real activity in Israel
Our assessment is that GDP will increase by 5.5 percent in 2022, similar to our previous forecast, and 5.0...
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