Bank of Israel Research Dept cuts 2016 growth forecast

Bank of Israel photo: Ariel Yerusalimsky

Israel's economy is now predicted to grow by 2.8% next year, down from 3.3% in the previous forecast.

The Bank of Israel Research Department has revised its growth forecast for 2016 downwards, from 3.3% in its previous forecast in September to 2.8% today. "The factors contributing to the downward revision of the growth forecast include the lower growth forecasts for global trade and imports by OECD countries, and the downward revision of assessments regarding the level of activity in the second half of 2015," the Research Department said in a statement.

Growth in 2015 is estimated at 2.4%, slightly down from the September forecast.

"Exports (excluding diamonds and startups) declined by about 2 percent in 2015, compared with an increase in global trade indices this year. Our assessment is that the relative weakness of exports in 2015 was partly the result of temporary factors, and that exports will recover in 2016, and will increase at a rate similar to the expected growth rate of imports to OECD countries.

"Investment in 2016 is expected to increase rapidly, mainly due to investment in a large company (which will mostly be imputed to the import of machines and equipment). The same is true of the increase in investment in 2017. Our expectation is that the growth rate of private consumption will moderate in 2016, after increasing rapidly in 2015, particularly consumption excluding durable goods.

"In 2017, the growth rate of global trade is expected to increase, which will support improvements in Israeli exports. A relatively high rate of growth is expected in Israeli exports in 2017 due to the exports of a large company. GDP is expected to grow by 3.1 percent in 2017," the Research Department statement says.

Inflation in 2016 is projected at 0.6%, and the Research Department now sees the bank's interest rate remaining at 0.1% in the first three quarters of 2016 and beginning to rise only in the fourth quarter. "The interest rate is expected to continue rising gradually in 2017, to 1.0 percent in the fourth quarter of 2017," the Research Department says, but qualifies this by stressing that "this forecast is conditioned inter alia on the expected monetary policy in the US and in other economies."

Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Bank of Israel photo: Ariel Yerusalimsky
Bank of Israel photo: Ariel Yerusalimsky
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