(photo credit: REUTERS)
Israel’s economy grew at an unexpectedly low rate in the first three months of 2016, with annualized GDP advancing a mere 0.8 percent, according to Central Bureau of Statistics data released Monday.
In 2015, GDP grew 2.5%, an already moderate level, and the Bank of Israel projected that GDP would advance 2.8% in 2016. Because Israel’s population is currently increasing about 2.2% a year, any economic growth below that level means the country’s per capita growth would be negative.
Economic growth in the quarter was dragged down by a 12.9% decline in exports (excluding diamonds and startup exits), plus a 0.4% contraction in private-sector output.
As always, the CBS noted that the data released Monday were preliminary and could be revised; in the third quarter of 2014, early estimates of GDP showed economic contraction of 0.4%, but were eventually revised upward to 0.6% growth.
“The GDP data should be a wake-up call to the government,” said Idan Azoulay, the head of mutual funds at Epsilon investments, arguing that the Bank of Israel, with its near-zero interest rate, has run out of tools and that the government should cut taxes to boost business investments and activity.
Some analysts took the news in stride, however.
“The relatively low growth in the first quarter of the year was expected and, therefore, is not a surprise. On the contrary, there are many points that actually indicate that the first quarter’s weak growth is temporary and that in the coming quarters the economy is expected to return to the growth rate that characterized recent years,” said Guy Yehuda, a senior economist at Psagot Investments.
The drop in exports, he said, resulted from a high concentration of just a few companies in the export sector, so when Intel, Teva and Israel Chemicals, which make up about half of industrial exports, do badly, it shows up in the macroeconomic data. Intel, for example, recently announced global layoffs.
Private consumption, on the other hand, grew 4%, and investment in fixed assets grew a healthy 7.5%, both of which Yehuda said were positive signs for Israel’s economy.