The economy in Israel has grown, but is still below pre-war levels
Initial estimates show 14.1% annualized growth in the first quarter, but GDP was down 1.4% in comparison with the first quarter of 2023.
According to the initial estimate by the Central Bureau of Statistics, Israel’s gross domestic product (GDP) shot up by an annualized 14.1% in the first quarter of 2024, or by 3.3% in the quarter itself. This follows a slump of 21.7% on an annual basis in the fourth quarter of 2023, in which the Swords of Iron war boke out. The rebound was expected, but its strength was greater than most analysts predicted. Their estimates were around 12%.
Despite the significant growth, the recovery from the crisis precipitated by the war is 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 services and the public sector, was 4.1% below the figure for the first quarter of 2023.
Consumption and investment figures indicate the continuing effect of the war. Private consumption did rise by 26.3% after plunging in the previous quarter, but was still low in comparison with the immediate pre-war period, and was similar to 2021 levels. Investment in fixed assets jumped by 49.2%, but it is still sluggish, and lower than in every quarter in the two and half years before the war.
Public consumption on the other hand rose moderately, by 7.1%, after the unprecedented 86% rise in the previous quarter, and it remains high, mainly because of defense expenditure.
Import and export figures also present a mixed picture. Imports of goods and services shot up by 32.7% in the first quarter of this year, while exports shrank by 11%, after falling in the previous quarter as well.
In January, in its most optimistic scenario, the Bank of Israel predicted 2% growth in GDP in 2024, which means negative growth taking the natural increase in the population into account.
More recent estimates are more pessimistic. Last month, the International Monetary Fund cut its growth forecast for Israel to just 1.6% this year, from 3.1% in its previous forecast. Credit rating agency S&P, which recently downgraded its rating for Israel, predicts growth of just 0.5% in 2024.
It’s difficult to conclude from the January-March statistics which prediction will prove most accurate, because of the uncertainty over the future course of the war. Growth in the first quarter was relatively high, but it mainly reflects recovery from the sharp fall at the start of the war. The reality is that GDP was 1.4% lower than a year previously. It’s also important to remember that we are dealing with an initial estimate only that is likely to change in further reports from the Central Bureau of Statistics.
Published by Globes, Israel business news - en.globes.co.il
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