Israel's GDP will grow by 4.5% in 2011, similar to the 4.6% growth achieved in 2010, but will slow to 4% in 2012, the Bank of Israel says in its Annual Report for 2010, published today. The central bank previously predicted 3.8% GDP growth this year; the revised prediction is substantially higher.
The Bank of Israel predicts that business product will be 5.2% in 2011, down slightly from the 5.3% growth in 2010. However, it predicts that the growth in private consumption will slow to 3.9% in 2011 from 4.9% last year.
The sharpest slowdown will be in exports: the Bank of Israel predicts that export growth will drop to 4.3% in 2011 from 11% in 2010. It expects investment in fixed assets, which made a major contribution to growth last year, to decline this year. It predicts 9.7% growth in imports in 2011, up from 9.2% in 2010.
More encouragingly, the Bank of Israel predicts that the unemployment rate will continue fall to this year, to an average of 6.1%, and to 5.9% in 2012 - an all-time low.
At a press conference, Governor of the Bank of Israel Prof. Stanley Fischer said, "2010 was an excellent year for the Israeli economy: very rapid growth reaching 7.7% in the fourth quarter; inflation below the inflation target ceiling; a current accounts surplus; rapidly growing exports; a lower than expected budget deficit; a debt-to-GDP ratio of 76% by the end of the year, below the OECD average; a declining poverty rate; and the unemployment fell accompanied by a rapid increase in participation in the labor force. Most growth was in the private sector, and Israel has a successful and strong private sector. The world is beginning to look at us and try to understand the source of our entrepreneurship."
Fischer was less optimistic about the future, and sent a clear message to the Knesset and the Histadrut (General Federation of Labor in Israel). "We are not the only ones who contribute and influence. The budget was passed less than three months ago, and there is already pressure, almost daily, to increase the budget framework. There is populist pressure from all kinds of directions to increase government spending. We must keep the framework if we want the economy to continue to grow. It's not possible to consider the budget framework as unimportant - it is important, its essential, and it's the secret of our success."
Published by Globes [online], Israel business news - www.globes-online.com - on March 30, 2011
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