The Central Bureau of Statistics has released a revised estimate of economic growth in Israel in the first quarter of 2021, according to which GDP fell at an annualized rate of 5.8%. This represents an improvement in comparison with the previous estimate, which indicated that the economy shrank at an annualized rate of 6.2%. This followed an annualized growth rate of 6.3% in the fourth quarter of 2020. Part of the reason for the switch from growth to decline is the fall in car imports in the first quarter of 2021 in comparison with the fourth quarter of 2020 following a change in taxation policy.
The items that contributed to the upward revision in the growth rate for the first quarter were private consumption (the annualized decline in which was revised from 3.4% to 2.4%. Excluding consumer durables, private consumption rose by an annualized 8.2%, according to the revised estimate, which compares with a rise of 7% in the previous estimate. Private consumption per capita fell at an annual rate of 3.8% in the revised estimate, which compares with 4.2% in the previous estimate.
The decline in investment in fixed assets was revised from an annual rate of 16% to 13.8%.
The decline in GDP in the first quarter of the year is not an indication of the trend that can be expected for the rest of the year, but it is worth recalling that the Bank of Israel lowered its growth forecast for 2021 to 5.5% when it made its interest rate announcement in June. The central bank did however raise its growth forecast for 2022 to 6%. If this forecast materializes, GDP at the end of 2022 will be only 0.5% below the level that was expected before the coronavirus pandemic broke out.
Market analysts estimate that the continuing growth in private consumption, activity in the real estate sector, and booming valuations of technology companies will boost annualized growth figures for the second quarter to double-digits.
Published by Globes, Israel business news - en.globes.co.il - on July 18, 2021
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