The Israeli economy grew by an annualized rate of 2.9% in the first half of this year, the Central Bureau of Statistics reported yesterday.
The agency revised what had been thought to be particularly dismal growth numbers for the first quarter of 2016, and second quarter growth figures came in at an annualized rate of 3.7%, painting a much brighter picture for the economy than had been feared.
Three months ago the statistics bureau had reported particularly worrying data regarding economic growth, with the country’s gross domestic product increasing by just 0.8% in the first quarter.
The figure set off alarm bells in the Prime Minister’s Office, at the Finance Ministry and at the Bank of Israel, prompting emergency meetings.
The Israeli central bank along with the Finance Ministry and Israel’s largest lender, Bank Hapoalim, all scrambled to lower their growth forecasts for the economy for this year as a whole and for 2017.
But then about a month and a half ago, the statistics bureau revised its measure of growth for the GDP during the first quarter from 0.8% to 1.3%. That was followed Tuesday by another revision of first-quarter growth, to an annualized rate of 2.2%. After some difficult months, Finance Ministry officials can now breathe a little easier.
As noted, the revised figures result in a revised GDP estimate for the first half of the year of an annualized 2.9%. And another revision reveals that the GDP was also larger last year than earlier reported, resulting in a debt-to-GDP ratio for 2015 of 63.9% and not the more indebted earlier figure of 64.6%. The rewrite also sent the debt ratio below the 64% level for the first time.
The new numbers also prompt the question as to whether the revised figures will nudge the Bank of Israel, the Finance Ministry and Bank Hapoalim to revise their 2016 growth figures as well. But the numbers do solve a conundrum that economists have been trying to solve over the past year and a half, mostly without success. On one hand, the data seemed to be showing that economic growth was tepid. They indicated that the export of goods and services , which are traditionally one of the Israeli economy’s most important growth engines, was dropping. On the other hand, employment figures that were being issued were excellent and there had been a seemingly unstoppable rise in the tax revenues that the government has been collecting.
The revised figures reflect a brighter picture than what they replaced not only when it comes to growth but also when it comes to Israel’s exports. The new data show that exports for the first half shifted from a negative direction to a solid increase of 4.9%. Diamond exports, for example, soared in the first six months of the year, by 14.6%, after declining for the year as a whole in 2015.
A Bank of Israel paper published last week also reported that the increase in tax receipts were the result of a larger than expected rise in the sale of durable goods, particularly automobiles, along with larger than expected gains in wages and the continued surge in the real estate market.
The revised statistics bureau data provide backing for this. The relatively rapid annualized growth in the economy in the second quarter of this year — at 3.7% — is also reflected in a 9.5% rise in private consumption and an 8.7% rise in government consumption.
Per capita private consumption, which is considered a measure of standard of living, rose in the first half of the year by 5.2% after increasing by 2.6% in the second half of 2015 and 1.7% in the first half of 2015.
In the first half of this year, consumer spending on motor vehicles alone jumped by 40.1%. And the imports of goods and services as a whole rose by 11.7% in the first half of this year.
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