Tel Aviv Stock Exchange TASE 311 (R).
(photo credit: Gil Cohen Magen / Reuters)
The Israeli economy grew at an annual rate of 3.6 percent in the second half of
2011, marking the beginning of a slowdown, the Central Bureau of Statistics
Growth eased in the fourth quarter to its slowest pace
since 2009 as exports and private consumption declined amid the European debt
crisis. The expansion rate fell to an annualized 3.2%, compared with a revised
3.8% in the third quarter, the statistics bureau said in a preliminary report.
The median estimate in a Bloomberg survey of seven economists was
Gross domestic product rose by an annualized 5.3% in the first half
of 2011 and 5.8% in the second half of 2010, the bureau said.
show the economy grew by 4.8% in 2011, mirroring the previous year’s growth
The economy should grow 2.8% to 3.2% next year, according to
forecasts made by the Finance Ministry, the Bank of Israel and the Organization
for Economic Cooperation Development. All three bodies slashed their Israel
growth estimates late last year, citing the effects of the ongoing European debt
crisis and an expected global economic slowdown.
Growth is expected to
slow to a little less than 3% in 2012, down from 4.8% in the previous year, the
International Monetary Fund said Monday, lowering its forecast from a September
prediction of 3.6%. The Bank of Israel cut its benchmark interest rate by a
quarter- point last month to 2.5%, the third reduction in five months, saying
the European debt crisis remains a threat.
Israeli officials have
continued to express optimism, including Bank of Israel Governor Stanley
Fischer, who said in late December that as long as a disaster is averted in
Europe, the situation in the United States kept under control and the Israeli
economy managed responsibly, Israel will emerge from 2012 with the average
growth rate of the past three decades.
“Despite the better-than-expected
headline figure, after analyzing the components, the picture looks less bright,”
said Modi Shafrir, chief economist at Tel Aviv-based I.L.S. Brokers. “Both the
export component and the private-consumption component continued to
A major contributor to growth in the fourth quarter was
government consumption, Shafrir said.
It expanded 8.8% after advancing
3.6% the previous quarter. Imports fell 11.1%.
Exports of goods
and services declined an annualized 17.4% after a 7.7% fall in the third
Private consumption fell 4%.
Investment in fixed capital
rose an annualized 1.2%, compared with 11.1% in the previous three
Public-consumption expenditure rose 5.1%, investments in fixed
assets increased 9.2% and personal-consumption expenditure per capita dropped
2.9% in the second half of 2011. All percentages are annualized, meaning they
compare the second half of 2011 to the second half of the previous
“Looking ahead, a lot depends on how the European crisis plays
out,” Victor Bahar, deputy manager of Bank Hapoalim’s economics department, said
in a telephone interview prior to the release.
“Global trade is
declining, and therefore, Israeli exports are trending downward. Private
consumption is at a low level.”
Israel’s Purchasing Managers Index fell
to its lowest in almost three years in January, indicating a “sharp contraction”
in industrial activity, Bank Hapoalim said Wednesday. The index fell to 36.3 in
January, the lowest since March 2009, from 42.7 the previous month, it said. The
decline was led by production and domestic demand it said.Bloomberg
contributed to this report.