Israel's economy unexpectedly shrank at 6.5% in Q1

Israel's GDP unexpectedly contracted by 6.5%, on an annualized basis, in the first quarter of 2021, according to the first estimate by the Central Bureau of Statistics. The disappointing data were influenced by the third lockdown, which began at the end of December and continued into February, and the sharp fall in car imports.

"Bloomberg" had forecast growth of 3.2% in the first quarter of 2021 and other analysts had predicted even higher growth. Without the fall in car imports, due to taxation changes, GDP 'only' contracted by 2.5% in the first quarter on an annualized basis.

Private consumption contracted in the first quarter by 3.2% on an annualized basis but without the sharp fall in consumption of durable goods (mainly the 86% fall in vehicles), private consumption grew by 7.2%.

Mizrahi Tefahot Bank Chief strategist Modi Shafrir said, "in our estimation, the contraction in the first quarter is not indicative of an expected trend in the rest of the year and we expect a substantial acceleration in growth in the second quarter and throughout 2021, supported by a jump in private consumption, a renewed rise in purchasing cars and continued expansion in exports of high-tech services and exports of goods."

Published by Globes, Israel business news - en.globes.co.il - on May 18, 2021