IMF sees 2.8% growth in Israel in 2015

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The IMF sees Israel ending 2014 with 2.5% growth, down from 3.2% in 2013.

International Monetary Fund (IMF) chief economist Oliver Blanchard warns that capital markets around the world are too complacent about the future consequences of the long duration of low interest rates, which has led investors to search for returns using various tools. His warning was included in the introduction to the IMF annual global economic forecast published in Washington today, just before the annual IMF and World Bank meeting.

Blanchard stated that because of this complacency, governments should be alert for developments, although he admitted that the tools available to governments might be inadequate. He added that the IMF was worried that the geopolitical situation in various regions around the world would have a negative impact on global growth, combined with a recurrence of wide gaps in returns between different markets.

According to the IMF forecast, the Israeli economy will grow 2.8% in 2015, and output will rise 2.5%, compared with the Israel Central Bureau of Statistics' forecast of only 2%. The IMF's forecast is almost identical to that of the Bank of Israel and the Ministry of Finance, which expect 2.8-3.0% growth. The IMF sees Israel ending 2013 with 2.5% growth, down from 3.2% in 2013. The IMF predicts 0.8% inflation in Israel in 2014, the lowest since 2007. Inflation is projected to rise to 1.8% in 2015, with unemployment remaining stable at 6%.

The IMF also says Israeli home prices are 25% higher than they would be if interest rates were higher.

It should be mentioned that the growth forecast for Israel is lower than for the global average. The IMF expects 3.8% growth in the global economy in 2015, following 3.3% in 2014. The IMF report states that the global economic situation has worsened, and the 2015 growth forecast was accordingly cut from 4% to 3.8%. The report added that in comparison to the expectations, the 2014 growth figures were a disappointment, and the same thing could happen with the more optimistic forecasts for next year.

The report admits that the global economy is performing poorly, with a risk of stagnation and deflation in the industrialized economies, other than the US and the UK. The IMF nevertheless opposes fiscal expansion in these economies, especially in Europe. The IMF states that fiscal discipline has helped to restore confidence in the markets, although it admits that investment remains low, even when securities prices in the capital markets of these economies gained ground.

At a press conference on the occasion of the report's publication, Blanchard said that the drop in growth was not a short-term phenomenon. The IMF believes that potential world economic growth is lower than previously estimated. He also noted that the differences between regions and between economies were becoming wider, and that the variance in growth rates had risen. He said the reason for the decline in world growth was not confined to very low growth in Europe; it also involved what was happening in other economies. For example, the 2015 growth rate in emerging markets was projected to be 1.5% lower than 2011 GDP growth in these markets.

Published by Globes [online], Israel business news - - on October 7, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Mutual funds, finance  phtoto to go
Mutual funds, finance phtoto to go
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