Israeli Economic Growth Slowed in 2018, Preliminary Figures Show

GDP expanded 3.2%, but economists are mostly optimistic for 2019 amid expected higher government and consumer spending

Avi Waksman
Reuters
Send in e-mailSend in e-mail
FILE PHOTO: The Tel Aviv Stock Exchange, August, 4, 2016.
FILE PHOTO: The Tel Aviv Stock Exchange, August, 4, 2016.Credit: Bloomberg
Avi Waksman
Reuters

Israel’s economy grew 3.2% in 2018, lower than the 3.5% or more that had been widely expected and the slowest pace since 2015, the Central Bureau of Statistics said in a preliminary estimate Monday.

The figure, which was in line with Finance Ministry and Bank of Israel forecasts, will be subject to revisions and could end up being considerably different than the statistics bureau’s preliminary estimate.

Growth was led by higher exports as well as gains in private and government spending, and in investment in fixed assets, the bureau said, noting that its estimate was based on data from the first nine to 11 months of the year.

Still, Israel’s growth in 2018 was above that of most other Western countries, including a 2.9% rate in the United States and an average for countries in the Organization for Economic Cooperation and Development of 2.4%.

But on a per capita basis, Israel’s economy grew by just 1.2% due to a relatively fast 2% rate of population growth, putting Israel well below rates of 2.1% for the United States and 1.9% for the OECD.

>> Read more: Israel’s poor worse off in 2017, says government reportIsrael's lucky finance minister is leaving his successor to be the fall guy | Analysis

Psagot Investment House said it wasn’t disappointed by the moderate growth rate for the Israeli economy, noting that most of the components of gross domestic product were good. The overall rate was weighed down by higher imports, which included imports of equipment being used to put the Leviathan gas field into production, and higher car imports.

The investment house said it expected the Israeli economy to roughly maintain its current growth rate in 2019 and show only a slight decline, helped by higher government and consumer spending.

That should encourage the Bank of Israel and its new governor, Amir Yaron, to continue raising interest rates, although possibly not as soon as the next meeting of the monetary committee next week.

The Bank of Israel, which projects 3.6% GDP growth in 2019, raised its benchmark interest rate to 0.25% in December from a record low 0.1%. It was the first change in the rate since early 2015, which it ascribed to solid growth and rising prices.

Yaron, in his inaugural speech earlier this month, stressed that while the main challenge for policymakers was to normalize interest rates, hikes should not be so aggressive as to risk halting growth.

The statistics bureau said that in 2018, exports – which account for nearly a third of the Israeli economy – grew 4%, slowing from 5.1% the year before. Consumer spending rose 4.1% and government spending rose 4%, both accelerating from 3.4% in 2017. Imports were up 7.6% versus a 5.1% rise in 2017.

Investment in fixed assets increased 2.7%, slowing from 3% in 2017 and a 12.8% spurt in 2016. However, investment in residential construction plummeted 8.5%, reflecting a worrying drop for Finance Minister Moshe Kahlon in new-home construction.

The bureau also revised down third-quarter GDP to an annualized 2.1% from an initial estimate of 2.3%.

Click the alert icon to follow topics:

Comments

SUBSCRIBERS JOIN THE CONVERSATION FASTER

Automatic approval of subscriber comments.

Subscribe today and save 40%

SUBSCRIBE
Already signed up? LOG IN

ICYMI

Trump and Netanyahu at the White House in Washington, in 2020.

Three Years Later, Israelis Find Out What Trump Really Thought of Netanyahu

German soldier.

The Rival Jewish Spies Who Almost Changed the Course of WWII

Rio. Not all Jewish men wear black hats.

What Does a Jew Look Like? The Brits Don't Seem to Know

Galon. “I’m coming to accomplish a specific mission: to increase Meretz’s strength and ensure that the party will not tread water around the electoral threshold. If Meretz will be large enough, it will be the basis for a Jewish-Arab partnership.” Daniel Tchetchik

'I Have No Illusions About Ending the Occupation, but the Government Needs the Left'

Soldiers using warfare devices made by the Israeli defense electronics company Elbit Systems.

Russia-Ukraine War Catapults Israeli Arms Industry to Global Stage

Flame and smoke rise during an Israeli air strike, amid Israel-Gaza fighting, in Gaza City August 6, 2022.

Israel Should End Gaza Operation Now, if It Can