Two Palestinians at an apartment building destroyed during the fighting between Israel and Hamas. The war against Palestinian fighters in Gaza, which began in July, is expected to shave as much as half a percentage point off Israel’s growth this year.
Reuters/Jerusalem
Israel’s economy grew at an annualised rate of 1.7% in the second quarter, its slowest since early 2013 and well below expectations as exports and investment fell, the Central Bureau of Statistics said yesterday in its initial estimate.
Growth for all of 2014 is projected at 2.9%, but Israel’s war against Palestinian fighters in Gaza, which began in July, is expected to shave as much as half a percentage point from growth this year.
Second-quarter gross domestic product (GDP) was forecast at 2.5% in a Reuters poll of analysts. First-quarter GDP was revised to growth of 2.8% from 2.9%.
The growth rate was the slowest since a 1.6% recorded in the first quarter of 2013.
Israel’s central bank, which unexpectedly lowered its benchmark interest rate to 0.5% last month, has said it puts little weight on preliminary GDP data because they are often revised.
That was the case in the first quarter, when GDP was initially reported as up 2.1% but was subsequently revised higher.
Exports, which comprise 40% of Israel’s economic activity, slid 17.7% in the second quarter after virtually no change the previous three months. Imports dipped by 5.5%.
Investment in fixed assets fell 4.5%, for a second-straight drop, while private consumption - another key economic driver - was up 3.1%, doubling the rate in the first quarter.
Government spending rose 4.2% and the economy grew 2.3% in the second quarter, excluding public sector spending.
The GDP data came after the bureau on Friday said that the annual inflation rate slipped to a seven-year low of 0.3% in July, with some policy members blaming weak consumer demand.
The central bank’s next interest rate decision is on August 25.