Israel GDP Q4 2021

Israel: Economic growth accelerates markedly in Q4

GDP growth accelerated to 16.6% in seasonally-adjusted annualized terms (SAAR) in the fourth quarter of 2021, up from the 6.7% increase recorded in the third.

The pickup came on the back of strengthening domestic demand: Household consumption jumped 19.2% in the fourth quarter, well above the third quarter’s 4.4% increase. The result was likely influenced by the declining unemployment rate in the period (Q4: 4.4%; Q3: 5.0%). Moreover, public spending growth accelerated to 17.3% in Q4 (Q3: +5.0% SAAR). This more than offset fixed investment growth moderating to 14.1% in the fourth quarter, down from Q3’s 18.3% expansion.

Turning to the external sector, exports of goods and services grew 26.3% in seasonally-adjusted annualized terms in Q4, markedly above the 14.8% increase recorded in the previous quarter. Meanwhile, growth in imports of goods and services came in at 25.5% in the fourth quarter (Q3: +11.5% SAAR).

On an annual basis, economic growth came in at 10.7% in Q4, more than double the 5.0% increase logged in the previous period. Consequently, the economy rebounded in 2021 as a whole, expanding 7.8% (2020: -2.1%).

Commenting on the performance of the economy in 2021, Murat Unur and Kevin Daly, economists at Goldman Sachs, noted:

“The largest driver of growth in 2021 as a whole was household consumption, which grew by 11.7% year-on-year and added 5.9 percentage points to the headline growth rate of 7.8% yoy.”

On what to expect ahead, they added:

“Following the strong Q4 figure and a sizeable adjustment to Q3 GDP growth, […] GDP growth in 2021 as a whole was 7.8% yoy, after a contraction of 2.1% yoy in 2020. Going forward, we expect sequential GDP growth rate to be around the trend rate of 3.0%–3.5%. Nevertheless, we mechanically revise our 2022 GDP growth forecast from +5.0% yoy to +6.0% yoy, following the sharp upside surprise today.”

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