The downtrend in Israel's exports is continuing in the second quarter. Updated figures for April published today by the Central Bureau of Statistics show that exports of goods were down by an annualized 21.7% in February-April 2016, following a 13.7% drop in November 2015-January 2016.
High-tech exports were down 32.1% in February-April 2016, following a 22.7% decline in the three preceding months. Exports of services (excluding startups) fell 4.1% in February-March 2016, after gaining 1.3% in November 2015-January 2016.
The only positive figure was in tourism to Israel, which has still not yet returned to its volume before Operation Protective Edge in the summer of 2014. Exports of tourism services were up 6.3% in February-April 2016, following a 0.9% rise in November 2015-January 2016. Tourist overnights in tourist hotels rose by an annualized 7.9% in February-April 2016, after going up 9.2% in the three preceding months.
Exports of business services, on the other hand, dipped 6.7% in February-April 2016, after inching up 1.9% in the three preceding months. Business services, which account for two thirds of total exports of services, include software and computers, research and development, communications services, engineering services, and technical, advertising, royalties, construction, commercial, and other services.
The gloomy picture in Israeli exports, which account for 35% of GDP, led Bank Hapoalim (TASE: POLI) yesterday to announce that it was cutting its growth forecast for the Israeli economy from 2.8% to 2.2%. In a "Globes" interview yesterday, Bank Hapoalim economic advisor Leo Leiderman said that Israeli exports had been hit hard by their dependence on areas suffering from worldwide weakness, such as drugs and high tech.
Leiderman called on the economic leadership in Jerusalem to reconsider the budgetary assumptions underlying the two-year budget to be submitted soon for cabinet approval. Ministry of Finance sources said that the downward revision in the bank's forecast was due to motives stemming from the Minister of Finance's measures to limit executive salaries in the banking system.
In contrast to the downtrend in exports, economic activity in other sectors, such as private consumption, which was responsible for all of the economy's growth in recent quarters, remained strong.
Credit card purchases by private consumers were up by an annualized 8.3% in February-April 2016, following 10.7% growth in the three preceding months. The Revenue Index of Retail Trade, an indicator of demand in the domestic market, rose by an annualized 10.9% in February-March 2016, following a 2.0% increase in December 2015-January 2016.
According to figures presented by the Ministry of Finance chief economist and other Ministry of Finance budget department personnel at the cabinet meeting, the Ministry of Finance is facing budget gaps of NIS 14 billion in 2017 and NIS 22 billion in 2018 in the two-year budget to be submitted for cabinet approval.
The multi-year debt framework was presented today to the cabinet for the first time, in line with an August 2015 cabinet resolution. The three-year budget plan includes a growth forecast, expected government spending, a state revenues forecast, the overall deficit forecast, a ceiling for permitted spending, the permitted deficit, and the differences between expected government spending and the permitted spending ceiling, and between the overall deficit forecast and the permitted deficit.
Published by Globes [online], Israel business news - www.globes-online.com - on May 31, 2016
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