GDP to Shrink 0.9% This Year

Israel is expected to end 2002 with a negative gross domestic product growth of minus 0.9 percent, the Central Bureau of Statistics announced yesterday.

Moti Bassok
Moti Bassok
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Moti Bassok
Moti Bassok

Israel is expected to end 2002 with a negative gross domestic product growth of minus 0.9 percent, the Central Bureau of Statistics announced yesterday.

The figures indicate that exports will fall 5 percent and GDP per capita (a figure reflecting standard of living) will amount this year to NIS 73,500 - down 2.9 percent on last year.

The data published by the bureau serve as a starting point for formulating the state budget for the coming three years - a process that is currently underway at the Prime Minister's Office, the treasury and the Bank of Israel. The figures are based on the first three quarters of the year, from January to September, as well as assessments with regard to expected developments in the economy in the last quarter. During the course of next year, the CBS will publish updated data on the state of the economy in 2002.

GDP shrank by 0.9 percent in 2001 as well, and this will be the first time since Israel's founding in 1948 that the economy has slowed over two consecutive years. In 2000, GDP soared 7.4 percent. Last month, CBS officials forecast a contraction of 0.8 percent for 2002.

"The GDP decline reflects an exceptional decline in the technology sector," the CBS said in a statement. "There was also a drop in industrial production and slower growth in other areas of the economy."

The bureau added that the fall in GDP was due largely to decreases in exports for goods and services and spending on everyday products. The declines were offset by a mild rise in investment in housing.

The drop in GDP per capita this year, 2.9 percent, follows a fall of 3.2 percent in 2001.

According to the CBS figures, Israel's business product will also fall 2.9 percent this year, following a decrease of 2.4 percent in 2001 and a rise of 9.7 percent in 2000. Industry is expected to see a negative growth rate of 2.2 percent, following a drop of 6.3 percent in 2001; construction this year will record a 0.7 percent fall-off, as opposed to a decrease of 9.3 percent last year; and the trade and service sector should see negative growth of 3.4 percent, following a 1.2 percent decline in 2001.

The estimated fall in exports this year, 5 percent, will stem primarily from a steep drop in services exports. Exports fell 11.7 percent in 2001 and rose 25.3 percent in 2000. Industrial exports are expected to fall this year by 7.3 percent; and tourism services exports will drop 11.4 percent, following a plunge of 33 percent in 2001. In contrast, diamond exports will see a 30.7 percent rise this year.

Imports of goods and services is expected to fall by 2 percent in 2002, due to households cutting back on purchases of durable goods and a drop in imports of input and equipment.

Given the relatively large drop in exports versus the lesser decrease in imports, Israel's trade balance is expected to worsen this year. The deficit in goods and services (other than defense imports) is expected to rise to $3.5 billion, as opposed to a deficit of $1.9 billion in 2001.

Private spending is projected to drop by 0.2 percent this year, following a rise of 2.1 percent in 2001 and 7.2 percent in 2000. Private spending per capita will fall this year 2.2 percent, following a stable year in 2001 and a rise of 4.4 percent in 2000.

On the other hand, spending on public consumption is seen to jump 6.5 percent this year, after rising by 3.3 percent in 2001 and 1.3 percent in 2000. According to the CBS, this item has been inflated by increased spending on defense, which is predicted to increase 13.2 percent this year versus 4.2 percent in 2001.

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