According to the initial estimate by the Central Bureau of Statistics, Israel’s gross domestic product (GDP) increased by 14.1% on an annualized basis in the first quarter of 2024, or by 3.3% in the quarter itself. This comes after a 21.7% decline on an annual basis in the fourth quarter of 2023 due to the Swords of Iron war. The rebound was anticipated, but it exceeded most analysts’ predictions of around 12%.
Despite the significant growth, the recovery from the crisis caused by the war is still incomplete. In the first quarter of 2024, GDP was still 1.4% lower than in the same quarter of 2023, and GDP per capita decreased by 3.1% between these two quarters. Private sector GDP, excluding housing services and the public sector, was 4.1% lower compared to the first quarter of 2023.
Consumption and investment data show the lingering impact of the war. Private consumption did increase by 26.3% after a sharp decline in the previous quarter, but it remained below pre-war levels and similar to 2021 levels. Investment in fixed assets rose by 49.2%, but it is still slow compared to the period before the war.
Public consumption, on the other hand, increased moderately by 7.1% after a dramatic 86% rise in the previous quarter, remaining high mainly due to defense spending.
Import and export numbers paint a mixed picture. Imports of goods and services surged by 32.7% in the first quarter of the year, while exports decreased by 11%, following a decline in the previous quarter.
In January, the Bank of Israel’s most optimistic scenario predicted 2% GDP growth in 2024, which would actually be negative growth when factoring in population growth.
Recent forecasts are more pessimistic. The International Monetary Fund reduced its growth forecast for Israel to 1.6% this year, down from 3.1% in its previous estimate. Credit rating agency S&P, which recently downgraded Israel’s rating, predicts 0.5% growth in 2024.
It is challenging to determine which forecast will be accurate based on the January-March statistics due to uncertainty surrounding the war’s future trajectory. The first quarter showed relatively high growth, primarily reflecting recovery from the initial war-related decline. However, GDP was still 1.4% lower than the previous year. It is important to note that these are preliminary estimates that may change in subsequent reports from the Central Bureau of Statistics.
Published by Globes, Israel business news – en.globes.co.il – on May 16, 2024.
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