Israel: Economy ends the year on a strong footing, partly thanks to temporary factors
The economy expanded 4.8% in quarter-on-quarter, seasonally-adjusted annualized rate terms (qoq SAAR) in the fourth quarter, up from Q3’s revised 4.5% growth (previously reported: +4.2% qoq). However, as has been the case in previous quarters, Q4’s figure was flattered by a frontloading of vehicle imports, this time ahead of tax changes in 2020. Underlying growth was more moderate, but still robust. Growth for 2019 as a whole was revised up from 3.3% to 3.5%.
Private consumption surged 10.0% in Q4 (Q3: +2.7% qoq) on higher consumption of durable goods, likely linked in part to greater vehicle purchases. Fixed investment was up 8.7% (Q3: -1.4% qoq), again likely due in part to volatility in vehicle imports, while residential investment declined. Government spending rose 0.9% in Q4, coming after Q3’s 4.5% increase.
On the external front, exports of goods and services rose 2.4% (Q3: -6.7% qoq), while imports were up 6.8% (Q3: +2.9%). As a result, the external sector subtracted 1.3 percentage points from growth, after subtracting 2.9 percentage points in Q3.
The economy should perform well this year, thanks to a tight labor market and gas exports from the new Leviathan field. On Leviathan, Padmasai Varanasi, an economist at Oxford Economics, highlights “proposals to export gas to Jordan and Egypt, with the value estimated at $19.5bn. The BoI estimates a 0.3% GDP contribution from natural gas production”.