Finance Minister Moshe Kahlon called an emergency meeting of top officials Monday after preliminary figures from the Central Bureau of Statistics showed a sharp contraction in economic growth in the second quarter.
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Kahlon told officials he wanted to have a plan for accelerating growth ready in the next several weeks. As a start, he asked Yoel Naveh, the treasury’s chief economist, to analyze the second-quarter data, in particular the reasons behind the slowdown in consumer spending growth.
Michal Abadi-Boiangiu, the accountant general, was asked to prepare a program for strengthening Israeli exports, for instance by increasing loans and trade insurance coverage for exporters. The budget division, which is headed by Amir Levy, was asked for a package of proposals for economic-growth drivers.
Other discussions were held between treasury officials and the bureau of Prime Minister Benjamin Netanyahu. Similar talks have been held informally with Bank of Israel Governor Karnit Flug.
The activity comes a day after the statistics bureau reported that gross domestic product rose at a very low 0.3% annual rate, with business sector GDP declining 1.6%. Consumer spending, which had been leading economic growth in recent quarters, climbed by just 0.9%, which amounted to a per capita decline of 0.9%.
Exports of goods and services fell at a rate of 12.5% in the second quarter.
“It’s hard to say that we didn’t know that the second-quarter data wouldn’t be good,” said a Finance Ministry official who asked not to be identified.
“There were early warnings, but we didn’t expect that the data would be so bad. Nevertheless, we’re talking about a single quarter. The economic is in relatively good shape and we have to look forward with optimism,” he said.
Sources said the meeting was conducted in an atmosphere of worry, but not panic. For now, there are no plans to adjust the treasury’s economic-growth forecast, which sees GDP expanding 3.1% this year, or 1.4% per capita, and accelerating to 3.3%, or 1.6% per capita, in 2016.
Officials, and Kahlon as well, noted that the headline GDP figure was at variance with other data pointing to higher rates of growth. They pointed to big rises in tax collection in recent months, falling jobless rates and a situation of full employment and rising wages in the past year.
Officials will be examining why there is such a contradiction between these developments and the slow growth for the quarter.
In fact, some officials urged Kahlon to wait until updated figures are released by the statistics bureau in another month. Economic growth is highly variable from quarter to quarter and it is likely, they said, that the figures would be more positive once the bureau had further refined its estimates.
They also pointed out that after the 2015-16 budget is approved this autumn by the Knesset, the government will have more funds to spend, which should give a lift to the public sector. Without a 2015 budget, the government under law has been operating on the basis of last year’s spending package, which has constrained spending.
Declining world trade and the stronger shekel have huirt Israeli exports, the officials agreed, but they praised Flug for the Bank of Israel’s policy of dollar-buying to mitigate the shekel’s strength.