GDP in Israel

Israel - GDP

Economic growth picks up steam in the final quarter of 2018

According to the first reading of national accounts data, which was released on 17 February by the Central Bureau of Statistics, the economy accelerated in the fourth quarter. Growth logged 3.1% over the previous quarter at a seasonally-adjusted annualized rate (SAAR), a noticeable pick-up from the third quarter’s upwardly revised 2.4% expansion (previously reported: +2.3% quarter-on-quarter). Compared to the same quarter of 2017, the economy expanded 2.8%, down from the upwardly revised 3.0% increase in the third quarter (previously reported: +2.9% yoy).

On the domestic front, the economy benefited from stronger growth in private consumption and a rebound in fixed investment, while government expenditure growth softened. Private consumption grew 4.9% quarter-on-quarter in the fourth quarter, which is a noticeable increase from the third quarter’s 3.3% expansion. Household expenditure growth was buttressed by a rebound in consumption of durable goods and rapid growth in expenditure on semi-durable goods. The rebound in fixed investment, which expanded 3.0% (Q3: -7.8% qoq), was driven by industrial investments, while residential building investment fell again. Meanwhile, government consumption grew 2.8%, down markedly from the 9.8% expansion in the third quarter.

On the external front, exports of goods and services swung from a 12.9% expansion in Q3 to a 3.0% contraction in the fourth quarter. Imports of goods and service, meanwhile, rebounded vigorously from a 3.7% drop in the third quarter to a 7.3% expansion in Q4.

Looking ahead, although the economy is expected to continue growing at a solid pace, economic growth is seen losing some steam this year. Domestic demand should remain resilient aided by an uptick in fixed investment growth. Meanwhile, merchandise exports should accelerate this year, although they remain vulnerable to lingering global trade tensions while regional instability further clouds the economic panorama.

The Bank of Israel expects GDP growth to reach 3.4% in 2019 and 3.5% in 2020. This is above FocusEconomics Consensus Forecast panelists prediction of 3.2% growth in 2019, which is unchanged from last month’s forecast. For 2020, our panelists see the economy expanding 3.3%.