How will the economy recover as we get vaccinated – Experiences from Israel

Key takeaways

Israel has completed mass vaccination and has started the gradual re-opening of the economy. In this piece, we dive into the Israeli data, which we believe give us some insights into what we should expect for other countries as well.

Consumption swiftly recovered in a number of industries – both in services and goods. The initial rebound held through March, but has since subsided somewhat, indicating that spending patterns return to normal quickly. Unfortunately, Israeli holidays disturb the picture somewhat in April.

The reopening of the economy has propelled consumer confidence to record-highs, whereas business confidence remains subdued, with notably the tourism industry struggling despite the domestic reopening.

COVID-19: Israel leads the pack on vaccinations and reopening

Israel has more or less completed its mass vaccination program with nearly 60% of the population being fully vaccinated. This may seem low but it is important to recognise that the population is very young (the age group 0-14 constitutes roughly 28% of the total population) and the Pfizer vaccine is not yet approved for children (although it may soon be the case, as the Pfizer vaccine has showed good results in young teenagers, see press release). Given the US is likely to approve Pfizer for young teenagers next week, Israel is likely to follow suit. Additionally, there is a higher degree of vaccine scepticism among Arab-Israelis and Haredi Jews.

Israel permitted restaurants, cafes, and event halls to reopen on 7 March, as the country was about to hit the half way milestone with 50% of the total population being fully vaccinated against COVID-19. Restrictions have been lifted gradually since then and the gatherings are currently limited to 20 people indoors and 100 outdoors. Despite the reopening and less social distancing, the COVID-19 situation continues to improve with very few new cases, declining hospitalisations and very few deaths. This supports the findings from scientific studies that vaccines not only protect oneself but also others due to lower transmission (positive externalities), see e.g. Milman et al (2021). Despite the re-opening, new cases, hospitalisations and deaths continue to move lower and COVID-19 is under control.

We think Israel’s re-opening looks very similar to what many European economies can expect in the coming months with a gradual reopening and a “Green Pass” as a key tool. We have dived into the Israeli macro data, which we think tell us something about what to expect also in the US and in Europe.

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