According to the Central Bureau of Statistics' preliminary estimate, Israel's GDP rose by an annual rate of 14.1% in the first quarter of 2024, or by 3.3% in the same quarter. This comes after a decline of 21.7% year-on-year in the last quarter of 2023, in which the Iron Sword War broke out. The recovery was expected, but its strength was greater than most analysts expected. Their estimate was about 12%.
Despite significant growth, the recovery from the crisis precipitated by the war remains only partial. GDP in the first quarter of 2024 was still 1.4% lower than in the corresponding quarter of 2023, and GDP per capita fell by 3.1% between these two quarters. Private sector GDP, which is GDP excluding housing and public sector services, was 4.1% lower than the number recorded in the first quarter of 2023.
Consumption and investment figures indicate the continued impact of the war. Private consumption rose 26.3% after falling in the previous quarter, but was still low compared to the immediate pre-war period, and was similar to 2021 levels. Investment in fixed assets jumped 49.2%, but remains sluggish, and lower than it has been in each quarter. One of the two and a half years before the war.
On the other hand, public consumption rose moderately by 7.1%, after an unprecedented rise of 86% in the previous quarter, and remains high, mainly due to defense spending.
Import and export figures also present a mixed picture. Imports of goods and services rose by 32.7% in the first quarter of this year, while exports contracted by 11%, after falling in the previous quarter as well.
In January, in the most optimistic scenario, the Bank of Israel forecast 2% growth in GDP in 2024, which means negative growth when taking into account the natural increase in population.
More recent estimates are more pessimistic. Last month, the International Monetary Fund lowered its growth forecast for Israel to just 1.6% this year, from 3.1% in its previous forecast. Credit rating agency Standard & Poor's, which recently downgraded Israel, expects growth of just 0.5% in 2024.
It is difficult to conclude from January and March statistics which predictions will be more accurate, due to uncertainty about the future course of the war. Growth in the first quarter was relatively high, but mainly reflected a recovery from the sharp decline at the beginning of the war. The fact is that GDP was 1.4% lower than the previous year. It is also important to remember that we are dealing with only a preliminary estimate which is likely to change in upcoming reports from the Central Statistics Office.
Published by Globes, Israel Business News – en.globes.co.il – on May 16, 2024.
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