Israel’s economy grew at an annualized 6.5% in the fourth quarter of 2016, an upward revision because of higher exports, investment and consumer spending at the end of the year, government data showed Thursday.
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In a preliminary estimate last month, the Central Bureau of Statistics said gross domestic product grew 6.2%. Third-quarter GDP growth was revised down to 4.1% from 4.2%.
After starting 2016 slowly, growth picked up and Israel’s economy expanded 4% for the year, a figure unchanged from last month’s estimate, to 1.2 trillion shekels ($325 billion). The statistics bureau said per capita GDP grew 2% in 2016. GDP growth is projected at between 3.2% and 3.5% in 2017.
The Bank of Israel has played down the data, attributing the fourth-quarter GDP jump to one-time factors, most notably an “atypical increase” in vehicle imports ahead of a revision of so-called green taxes at the start of 2017.
Excluding that, GDP growth was slightly above an annualized 3% in the fourth quarter. Similarly, Bank of Israel Deputy Governor Nadine Baudot-Trajtenberg told Reuters last week that even a 4% growth rate last year did not point to a “step-up” in the economy given Israel’s annual population growth of 2%.
The economy’s strong performance was one factor behind the surge of the shekel in the past two weeks, raising speculation that the central bank would begin raising interest rates from the current record low 0.1%. After intervening heavily in the market last week, the shekel pulled back from its highs and on Thursday the dollar extended gains, strengthening 0.1% to a Bank of Israel rate of 3.6880 shekels.
In the October-December period, exports which comprise more than 30% of Israeli economic activity jumped 11.1%, consumer spending rose 3.8% and investment in fixed assets climbed 8%. Imports rose 6.5% and government spending was up 3.2%. For all of 2016, exports grew 3%, consumer spending 6.3% and investment 11.3%.
Along with moderate economic growth, Israel has zero inflation. The annual rate was up by 0.1% in January after 28 months of falling prices, which coincided with a slump of energy prices worldwide.