Not everybody is convinced that the Israeli economy will emerge from its
slowdown next year: HSBC announced Thursday it expects moderate growth of 2.8
percent in 2013 before a rebound of 3.4% in 2014, in tandem with improving
“Until recently, the Israeli economy has been fairly
resilient to slowing global growth,” the British multinational
financial-services company said in a report. “GDP growth remained fairly steady
from mid-2011 to mid- 2012, averaging 3.2%. Nevertheless, growth slowed to 2.9%
in [the third quarter of] 2012...and leading economic indicators suggest that
this trend will spill over into 2013.”
The Treasury recently updated its
2013 growth forecast to a surprising 3.5% of GDP, predicting that the economy
will receive a greater boost than previously expected from offshore production
of natural gas. The Bank of Israel is expected to update its 2013 growth
forecast, which currently stands at 3%, early next week.
In contrast to
the Treasury’s optimism, HSBC said it expected natural gas production to
contribute 0.6% to GDP by 2014 but only 0.2% to tax revenues, reaching 1% by
2020. It did not say how much natural-gas production should impact the economy
The report pointed out that several business surveys are
trending downwards, reflecting contraction in both export and domestic orders.
In the third quarter, export growth stalled despite the boost received from the
new Intel plant, and private consumption per capita declined 0.4% as
unemployment drifted higher and real wages remained stagnant, the report
Indicators of consumer confidence suggest growing household
pessimism, partly due to the one-percentage- point increase in value-added tax
that was imposed in an attempt to stem the growing fiscal deficit, HSBC
Factors that could reduce domestic demand in 2013 include a
contraction in residential investment and the likely fiscal consolidation
following the January 22 election, the report said.
The deficit is
expected to reach 4.2% of GDP in 2012, and significant fiscal adjustments will
be necessary to reach the 2013 deficit target of 3%, it said.
predicted that weak domestic demand and slack in the labor force should limit
inflation to about 1.7%. The shekel is likely to appreciate to about NIS 3.60
per dollar on the back of an improvement in the current-account balance as
natural-gas production commences in the second quarter, reducing energy imports.