Israel’s economic growth should start picking up in the first half of next year
thanks to a boost in external demand, the OECD concluded in its biannual
economic outlook on member states Tuesday.
Output growth is projected to
drop from 3.1 percent in 2012 to 2.9% in 2013 (incorporating a 0.2
percentage-point boost from the new Tamar offshore gas field), but then rebound
to 3.9% in 2014, the report said.
The combined economic growth of all 34
OECD countries is expected to bottom out at an annualized 0.5% in the fourth
quarter of 2012 and 1% for the entire year, before rising to 1.9% in 2013 and
2.5% in 2014. The euro bloc is expected to return to positive economic growth in
the second quarter next year, ending 2013 with real GDP growth of 0.6% and 2014
with growth of 1.6%.
Focusing on Israel, the report predicted that
electricity and food price hikes will continue to push up inflation in the
short-term. If public expenditure rises in line with the legislated ceiling and
revenue- raising measures yield the expected results, then the government
deficit should be on target in 2013 but fall short in 2014.
deficit targets for 2013 and 2014 have been raised to 3% and 2.75% of GDP,
respectively, replacing the initial targets of 1.5% and 1%.
these revised targets will nevertheless prove challenging,” the report
It noted that the authorities have already embarked on
revenue-raising measures, such as a VAT hike, increases in personal income tax
and social contributions, and intensified tax collection, adding that agreement
on a 2013 budget has been postponed until after the January
“Risks in the global economy present the greatest threat to
growth,” the report said.
“In addition, geopolitical tensions remain
high. There are risks surrounding budget outcomes, as the proceeds of
intensified tax collection are particularly uncertain. The budget postponement
and the upcoming general election add further risk.”
In its editorial,
the report warned that signs of emergence from five years of global economic
crisis have “more than once” given way to a renewed slowdown or even a
double-dip recession in some countries. The risk of a new major contraction
cannot be ruled out, it said, pointing out that a recession is ongoing in the
euro area and that the US economy is performing below what was expected earlier
Failure by American legislators to reach a consensus on the
fiscal cliff and debt ceiling, and by European legislators to agree on
management of the euro-area crisis, “could have significant consequences on the
global outlook,” the editorial said.
A positive policy response is
possible, it said, and it should be based on the full use of available policy
tools: monetary, fiscal and structural. It suggested that the monetary policy
stance should be further eased in many countries and that excessive near-term
fiscal consolidation should be avoided, given high fiscal multipliers at