Israeli economic growth slowed significantly in the second quarter, but most of the slowdown was due to a sharp drop in car imports, the Central Bureau of Statistics reported Thursday.
In a preliminary estimate, the CBS said gross domestic product grew an annualized 2% in the April-June period, down from a revised 4.8% in the first quarter when car imports surged. The CBS also revised its 2017 GDP figure to show faster growth of 3.5% than the 3.3% reported earlier.
The second-quarter slowdown had been widely expected, although the preliminary figure was on the low side of forecasts.
Economists polled by Reuters on average had expected a 2.4% expansion. The Finance Ministry said last month that second-quarter GDP would be between 2% and 2.5% after a 14% drop in auto imports. The imports themselves don’t contribute to GDP, but the (heavy) taxes paid on them are.
Despite the quarterly dip, economists say GDP is still on track to expand at a faster pace this year than in 2017. The Bank of Israel raised its forecast for 2018 GDP growth in July to 3.7%. The treasury did the same in June to 3.5% after the Organization for Economic Cooperation and Development forecast growth of 3.7% for the year.
Still, the metrics for the second quarter were poor. The CBS noted that after discounting auto imports, GDP expanded at a sluggish 3% annualized pace. In the second quarter, consumer spending edged up at just a 0.5% pace after surging 9.6% in the first quarter.
Exports, which account for about 30% of the Israeli economy, slipped 0.1% in the quarter, while investment in fixed assets declined 6.6%. Public spending, however, continued to grow strongly, climbing at a 5.2% rate in the quarter.
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