The drop in Israeli exports worsened in February through April, the Central Bureau of Statistics said Tuesday, reinforcing concerns that economic growth was slowing sharply and that Israel may slip into a recession.
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The stats bureau said merchandise exports declined at a 21.7% annualized rate in the three months, accelerating from a 13.7% decline in the November-January period.
High-tech exports, which have driven overall exports in recent years, showed the biggest drop, plunging at a 32.1% annualized rate in February-April. Lower-tech exports fell at a much slower rate and exports from old-line industries even showed a modest 3.7% increase in annualized terms.
Sagging exports were a reason Bank Hapoalim lowered its growth outlook for the Israeli economy this week. Citing the decline in exports of goods and services, it said gross domestic product would grow just 2.2% this year, down from a previous projection of 2.8%.
“The risk of the Israeli economy sliding into a recession, defined as a decline in per capita GDP, has grown,” Hapoalim Chief Economist Leo Leiderman said in a report released Monday, adding that based on its current forecast per capita, GDP would still be positive. The bank was the first major forecaster to cuts its projection for 2016.
But Shauli Katznelson, head of research for the quasi-official Israel Export Institute, said the decline in merchandise exports was concentrated in a few industries, namely chemicals, pharmaceuticals and electronic components. Each is dominated by a single company – Israel Chemicals, Teva Pharmaceutical Industries and Intel Israel.
“We’re talking about big companies whose exports are subject to volatility, so things could change direction over the course of the year,” he said, adding that discounting those three firms, industrial exports were actually improving.
In fact, as the stats bureau was reporting distressing news about exports, Israel’s industrial production index for February-March was up an annualized 5% while retail sales showed a 10.9% gain, signaling that the high levels of consumer spending that have been driving the economy remain in place.
Katznelson said the figures showing declining exports should serve as a warning about the country’s concentrated export sector.
“Big export companies are important and contribute to the economy,” he said. “But exports by just one or more of these companies can fall because of changes in technology, shifts in production levels or global developments – all of these affect Israeli export levels quickly and powerfully.”