Israel’s economy is on track to grow by 2.5% this year, the Central Bureau of Statistics said Sunday, marking the second consecutive year of sub-3% expansion in more than a decade after a 2.6% pace last year.
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Making its forecast on the basis of figures for the first seven to nine months of the year, the statistics agency said the economy this year was being boosted by a forecast 4.1% increase in consumer spending. Although a fall in investment in fixed assets was less than in 2014, the economy was hit by a decline in exports that the bureau said will fall 2.1% this year, reversing an increase the year before.
In its third estimate of second-quarter gross domestic product, the bureau left the figure unchanged at an annualized 0.1%, but it did revise first-quarter GDP growth to an annualized 2% from 1.8%.
The full-year growth estimate means that GDP per capita this year will work out to 134,000 shekels ($34,940 at current exchange rates), an increase of just 0.4%.
The paltry growth figures have got the government worried, even though they haven’t translated into a decline in its tax collections or high unemployment. But the upsurge in Palestinian attacks in the last two weeks has depressed retail sales and could have a wider effect if they continue, while slowing world trade is weighing on Israel’s key export sector.
Meanwhile, the Bank of Israel and the Finance Ministry have both cut their 2015 growth estimates to 2.6% from 2.9%-3%. They expect growth to pick up to a rate of 3.3-3.7% in 2016.
The statistics bureau said imports of goods and services would likely decline 4.1% in 2015, after growing 3.7% in 2014. Investments in fixed assets will decline 0.8%, slowing from a 2% drop in 2014.
On Friday, Fitch Ratings affirmed Israel’s long-term foreign and local currency ratings at A and A-plus respectively, with a Stable outlooks.
Fitch said Israel remains vulnerable to geopolitical tensions, but appeared to give more weighting to economic data, in particular to the fact that natural gas production will ensure current account surpluses of more than 5% in 2015-17 and large inflows of foreign direct investment. The credit rating agency said it too early to assess wave of terror attacks on the economy.
“An improving external economic environment, investment and tax cuts are forecast to lift real growth back over 3% in 2016 and 2017,” Fitch said. Earlier this month, another rating agency, Moody’s, affirmed Israel’s A-1 credit rating