Economy under-performs with meager 0.8% growth in first quarter

Private consumption, on the other hand, grew 4%, and investment in fixed assets grew a healthy 7.5%.

Shekel money bills (photo credit: REUTERS)
Shekel money bills
(photo credit: REUTERS)
Israel's economy grew at an unexpectedly low rate in the first three months of 2016, with annualized GDP growing a mere 0.8% , according to Central Bureau of Statistics data released Monday.
In 2015, GDP grew by 2.5%, already a moderate level, and the Bank of Israel projected that GDP would grow at 2.8% in 2016. Because Israel's population is currently growing at around 2.2% a year, any economic growth below that level means that Israel's per capita growth would be negative.
Economic growth was dragged down by a 12.9% fall in exports (not including diamonds and start-up exits), plus a 0.4% contraction in private sector output.
As always, CBS noted that the data released Monday were preliminary and could be revised. In the third quarter of 2014, early estimates of GDP showed an economic contraction of 0.4%, but were eventually revised upward to 0.6% growth.
Some analysts took the news in stride.
"The relatively low growth in the first quarte of the year was expected, and therefor is not a surprise. On the contrary, there are many points that actually indicate that the first quarter's week growth is temporary, and that in the coming quarters the economy is expected to return to the growth rate the 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. When Intel, Teva, and Israel chemicals, which make up around half of indusrtial 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.
But not everyone was so nonchalant about the GDP figures.
"The GDP data should be a wake-up call to the government," said Idan Azoulay, the head of mutual funds of Epsilon investments. The Bank of Israel, with its near-zero interest rate, has run out of tools, he argued, and the government should cut taxes to boosting business investments and activity.