Money cash Shekels currency 521.
(photo credit: Reuters)
Israel’s economic growth slowed to a 2.2 percent annual rate in the third
quarter, according to data the Central Bureau of Statistics released on
The sluggish growth follows a stellar 4.6% annualized increase in
the second quarter and 2.6% in the first.
The Bank of Israel had
originally projected overall growth for 2013 at 3.8% – one percentage point of
which was ascribed to new inflows of natural gas – but lowered its estimate in
September to 3.6%.
Though private consumption, government expenditure and
investment all continued to grow at healthy rates in the third quarter, a
dramatic decrease in net exports – a byproduct of the stubbornly strong shekel –
dragged down the growth figures.
Exports fell an annualized 16.4% in the
third quarter, after rising 2% in the previous quarter. At the same time,
imports rose at rate of 8.6%.
The Bank of Israel has repeatedly
intervened in the foreign exchange markets, buying foreign currency to keep the
shekel from getting too strong and making exports more expensive for foreign
buyers. In the process, it has brought foreign reserves to record highs and
dropped the benchmark interest rate from a high of 3.25% in September 2011 to
its current 1%. Yet despite the interventions, the shekel has appreciated by
5.3% against a basket of currencies since the start of the year. In part, the
slowdown in growth reflects a global phenomenon; in October, the International
Monetary Fund lowered its world growth projections for 2013 from 3.2% to
The moderation in growth is a challenge to Prime Minister Binyamin
Netanyahu and Finance Minister Yair Lapid, who just weeks ago, called for growth
rates closer to the 5% levels seen before the global economic
Netanyahu tied the high growth target to national
“The only way to fund our security needs... is through economic
growth. Not through excessive taxation, not through getting the money from
someone else,” the prime minister said at the Israel Democracy Institute’s
Hurvitz forum in Eilat.
A spokesman for Lapid said the Finance Ministry
was examining the data, while Economy and Trade Minister Naftali Bennett had no
comment on the matter.
The Central Bureau of Statistics warned, as it
always does, that the findings should be treated cautiously, as first estimates
of quarterly data are often revised as new data becomes available.