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(photo credit: Ariel Jerozolimski)
The economy expanded 4.4 percent in annual terms in the fourth quarter last year, driven by strong growth in exports and private consumption, the Central Bureau of Statistics reported Tuesday.
“Israel’s economy appears to be well on the road to recovery,” Barclays Capital economist Daniel Hewitt said. “Exports have been booming, up 28 percent in January. However, the Bank of Israel may consider the recovery as still fragile due to recent weakness in European growth, a major trading partner with Israel.”
Since the first quarter of last year – when the economy contracted at an annualized rate of 3.1%, overshadowed by the global financial crisis – the economy started to recover, growing at an annualized 1.2% in the second quarter and 3% in the third quarter. In the fourth quarter, the economy grew at the fastest pace since the first quarter of 2008. The economy expanded at a rate of 0.5% in 2009, while Organization of Economic Cooperation and Development member states saw their economies contract at an average rate of 3.5%.
In light of recent strong economic indicators, the Bank of Israel recently raised its growth forecasts for 2010 to 3.5% from 2.5%, while the International Monetary Fund expects more moderate growth of 2.5% this year.
“The central bank’s forecast of 3.5% in 2010 still seems too optimistic,” said Michael Sarel, head of Harel Investment House’s economics and research division. “For the realization of this forecast, the economy will need to grow at a rate of 4% during each of the four quarters of the year, which is a possible scenario. But we are less optimistic that it will happen.”
Unemployment has dropped to 7.2% and would likely decline to pre-crisis levels of about 6.2% within a year or so, Finance Minister Yuval Steinitz said Tuesday.
“I can say with satisfaction that Israel withstood the test of the global crisis successfully,” he said at a conference in Jerusalem.
The statistics bureau’s figures showed that fourth-quarter growth in the business sector was an annualized 4.2%, while consumer spending rose an annualized 4.4%. Exports of goods and services surged 33% during the fourth quarter, after growing 7.1% in the third quarter and contracting 0.1% in the second quarter and 26% in the first quarter.
The volume of exports, not including diamonds, rose 16.1% in the fourth
quarter. Imports of goods and services grew 13.8% in the fourth
quarter, after expanding 7% in the third quarter and contracting 38% in
the first quarter.
Investment in fixed assets declined 9.4% in the fourth quarter, after
growing 7.2% in the third quarter and 3.6% in the second quarter.Bloomberg contributed to this report.