Israeli economic growth slowed sharply in the third quarter and performed less well in the second than previous reported, the Central Bureau of Statistics reported on Sunday. Gross domestic product grew at a preliminary 2.3% annualized rate in the third quarter, well under the 2.8% average forecast of analysts polled by Reuters. In the second quarter, the economy grew by 1.2%, a sharp drop from the 1.8% the CBS had estimated just a month ago and to 4.6% from 5.2% for the first quarter. As a result, GDP grew in the first half of 2018 at an annualized 3.7%, versus the 4.2% the CBS estimated a month ago. “The figure for all of 2018 will be reasonable because of the 4.6% rate registered in the first quarter,” said Alex Zabezhinsky, chief economist for the investment house Meitav Dash. “But unless the trend changes, we’ll see the economy moving toward a growth rate of 2% to 2.5% in 2019.” A slowdown like that, he said, would present serious problems for the government because it would be an exacerbation of the drop in tax collections it has suffered over the last several months. That, along with higher spending, has already boosted the budget deficit in the 12 months through October to 3.6% of GDP, far higher than its target. The 2019 budget assumes that Israel’s economy will grow by 3.1% in 2019. On the positive side, export, which account for nearly a third of economic activity, rose at a 7.2% rate in the third quarter, the CBS said. Hut investment in fixed assets slipped 6.3%, following a 4.6% drop in the second quarter and government spending rose a sharp 9.5%. Imports dipped at a 5% rate as consumer spending increased 2.1% rate, or just 0.1% on a per capita basis. We've got more newsletters we think you'll find interesting. Please try again later. The email address you have provided is already registered. If government spending hadn’t risen and imports had fallen, GDP growth in the third quarter would have been zero, economists said. The slowing economy raises interesting policy questions for the Bank of Israel and its incoming governor, Amir Yaron. So far, the bank’s monetary policy committee have based interest rate policy on trying to get inflation back into the government target of 1% to 3% annually and have largely assumed that economic growth was on a steady path, said Zabezhinsky. “If there really is a slowdown and housing prices also aren’t rising, the window for raising interest rates has closed,” he said. The central bank’s economists forecast economic growth of 3.7% this year, a figure the economy is likely to meet. The Bank of Israel’s economists have forecast rate increases starting in the first quarter of 2019 from what is now a record low 0.1%.
Israel’s economic growth slowed in Q3 2018 to an annualised rate of 2.3%, compared to analysts' estimates of 2.8%, and performed worse than expected in Q2 2018, recording 2.1% growth, down from a Central Bureau of Statistics’ (CBS) estimate of 1.8%. Annualised GDP increased 3.7% for H1 2018, compared to CBS forecasted growth of 4.2%. Continued slowdown could worsen government finances, which have already been hit by a fall in tax revenue. Meanwhile, exports rose 7.2% in Q3 2018, while imports fell to 1.2%, CBS has reported.