Economic growth in Israel in 2021 was higher than expected, reaching 8.1 percent. This follows a sharp 16.6 percent increase in GDP in the 4th quarter of the year (compared to the previous quarter, year over year).
This is included in Wednesday’s Central Bureau of Statistics report. The 2021 growth rate – the highest in 20 years – comes after a 2.2 percent shrinkage in the Israeli economy in 2020, due to the COVID crisis.
Official agencies expected sharp growth in 2021, but not 8.1 percent. This expansion took place due to a marked increase in private consumption as well as a jump in Israeli exports, as a mood took hold that the COVID crisis was drawing to an end, along with government refusal to impose lockdowns.
Overall for 2021, Israel’s 8.1 percent growth ranks among the top in the OECD. The average OECD member’s growth (among countries to publish their figures thus far) stands at 5.3 percent for 2021. Israel trails only Ireland, which grew at 15.2 percent in 2021.
However, examining the increase in growth per capita shows a more modest picture, due to the high natural population growth in Israel compared to the rest of the OECD. GDP per capita rose here by 6.3 percent in 2021 – slightly above the average growth per capita in developed countries, which stood at 5 percent in 2021.
The most significant contribution to the high growth in 2021 came from a notable increase in private consumption, which rose by 11.7 percent. The jump in private consumption contributed 5.8 percent of the total increase in growth this year.
Israel led the OECD in increased private consumption, while the OECD increase averaged 5.6 percent, this following restrictions on various economic activities in the year. But again, when examined per capita, the growth in Israel is somewhat reduced, to 9.1 percent, again due to higher natural population growth in Israel.
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The export sector also contributed to the sharp growth, mainly due to high-tech, which continue to gallop, growing 13.6 percent over the previous year. The value of service exports has grown to 52 percent of the total, overtaking the export of goods for the first time, another effect of the growth of high-tech services relative to total exports.
Imports also increased sharply, by 18.7 percent in 2021.
This increase came mainly in tourism, which follows the steep decrease in outgoing tourism in 2020 due to widespread COVID lockdowns. The rise in imports offset the decline in income from exports.