Israel: GDP growth accelerates in the fourth quarter
Economic growth accelerated in the fourth quarter, with GDP expanding 5.8% in seasonally-adjusted annualized terms (SAAR) (Q3: +2.1% SAAR). The reading beat market expectations and put the overall 2022 expansion at 6.4%. However, Q4’s figure was flattered by a one-off jump in vehicle sales, likely ahead of a tax hike on electric vehicles in January.
Looking at components, private consumption grew 10.6% SAAR in the fourth quarter (Q3: -1.2% SAAR). Government consumption growth moderated to 2.6% in Q4 (Q3: +5.8% SAAR). Meanwhile, fixed investment growth waned to 4.8% in Q4, from the 14.0% growth logged in the prior quarter.
On the external front, exports of goods and services contracted 10.4% in Q4, marking the worst result since Q2 2020 (Q3: +1.0% SAAR). In addition, imports of goods and services contracted 7.1% in Q4 (Q3: +2.0% SAAR).
On an annual basis, economic growth cooled to 2.9% in Q4, from the previous quarter’s 7.5% expansion.
The Consensus is for a further, albeit milder, GDP expansion in Q1. Tighter monetary policy, slowdowns in developed economies and elevated inflation are expected to drag on momentum somewhat. On the outlook for 2023 as a whole, the EIU said:
“Both external and domestic demand growth will cool notably in 2023, given higher living costs, rising interest rates, a downturn in global technology investment and recessions in Israel’s main export markets. However, high-tech services exports will be less sensitive to the global downturn than those from other industries. High inflation will also dampen consumer demand growth, but accelerating population growth arising from a surge in immigration, alongside an ongoing rise in employment, will keep private consumption growth positive.”