Israel: GDP records largest drop on record in Q1
GDP fell 7.1% in the first quarter, contrasting the 4.6% expansion recorded in the fourth quarter, amid lockdowns at home and abroad. On an annual basis, economic growth waned to 0.4% in Q1 from Q4’s 3.8% increase. Q1’s reading marked the slowest growth since Q1 2009.
Private consumption was down 20.3% (Q4: +10.4% qoq saar) on lower purchases of durable and non-durable goods. Fixed investment contracted 17.3% (Q4: +7.3% qoq saar) amid lower housing and industrial investment, while government consumption was down 10.3% (Q4: +0.1% qoq saar), likely in part due to the lack of a budget for 2020 leading to a spending freeze.
On the external front, exports fell 5.9% (Q4: +6.8% qoq saar) while imports plummeted 27.5% (Q4: +11.3% qoq saar).
The economy is seen in a deep recession this year, with tourism and high-tech service exports particularly hit by lockdowns abroad. However, fiscal stimulus and the reopening of the domestic economy from mid-April should support activity.
Moreover, medium-term prospects are still upbeat. As Padmasai Varanasi, an economist at Oxford Economics, comments:
“Over the medium term, the economy should benefit from an accommodative monetary policy and gas sector developments […] a robust service sector and strong consumer demand should underpin growth, while also partially offsetting the potential slowdown in export growth and regional political tensions.”