Israel GDP Q1 2022


Israel: GDP records sharpest contraction since Q2 2020 in the first quarter

May 16, 2022

GDP fell 1.6% in seasonally-adjusted annualized rate terms (SAAR) in the first quarter, contrasting the 15.6% expansion tallied in the fourth quarter of last year and undershooting market expectations of modest growth. Q1's reading marked the worst result since Q2 2020. The contraction was partly the result of a challenging base of comparison, following three consecutive quarters of robust growth. Excluding net taxes on imports—which often distort Israel’s GDP figures due to fluctuations in car imports—the economy contracted 3.0%.

The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Household spending contracted 0.7% in Q1 (Q4 2021: +18.2% SAAR). Public spending deteriorated, contracting 7.0% in Q1 (Q4 2021: +12.9% SAAR). Fixed investment growth fell to 3.3% in Q1 (Q4 2021: +14.7% SAAR) amid declining industrial investment—potentially linked to the tumbling value of the Nasdaq stock exchange, where many Israeli tech firms are listed.

Exports of goods and services contracted 11.0% in Q1, marking the worst reading since Q2 2020 (Q4 2021: +24.3% SAAR). In addition, imports of goods and services growth moderated to 17.3% in Q1 (Q4 2021: +28.5% SAAR).

On an annual basis, economic growth lost momentum, cooling to 9.6% in Q1, compared to the previous period's 11.1% increase.

Looking ahead, the economy will return to growth. However, the expansion will be more moderate than that observed last year, due to tighter monetary policy, higher inflation, a less favorable external environment and a normalization of demand post-pandemic.

FocusEconomics analysts estimate the economy expanding 5.1% in 2022, unchanged from last month’s forecast, before growing 3.6% in 2023.

Author:, Economist

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Israel GDP Chart

Israel GDP Q1  2022

Note: Year-on-year and quarter-on-quarter SAAR changes of GDP in %.
Source: Central Bureau of Statistics (CBS) and FocusEconomics Consensus Forecast.

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