Israel's GDP growth slows to 2.2% in third quarter

Slowdown follows stellar 4.6% growth in the second quarter, and 2.6% growth in the first quarter of 2013.

Money cash Shekels currency 521 (photo credit: Reuters)
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 Sunday.
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 2.9%.
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 crisis.
Netanyahu tied the high growth target to national security.
“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.