Recovery from Israel's relatively mild downturn is underway, and growth should be close to potential by the end of 2011, said the OECD in its Economic Outlook today. The OECD predicts that Israel will achieve 3.8% GDP growth in 2010, and achieve 4.2% growth in 2011.
The estimates are higher that the growth forecasts of the Bank of Israel of 3.7% GDP growth in 2010 and 4% growth in 2011. Last week, the Central Bureau of Statistics reported that Israel's annualized growth rate slowed to 3.3% in the first quarter of 2010 from 4.8% in the fourth quarter of 2009.
The OECD also predicts that inflation in Israel will move back toward the upper limit of the government's 1-3% target range in 2011. The OECD reiterated its position that the Bank of Israel should officially end its currency purchases, and added that the Bank of Israel will probably substantially raise the interest rate by the end of 2011.
The OECD also warns of a speculative bubble in real estate in Israel, if home prices continue to rise. The OECD's assessment is in line with the assessment by the Bank of Israel, which while insisting in its Annual Report for 2009 that there is no bubble, nevertheless cautioned that a bubble is possible if prices continue to rise.
The OECD said that the jump in home prices raises the possibility of a speculative real estate bubble, which will dim the effect of a further monetary tightening.
The Central Bureau of Statistics today announced that demand for new apartments fell by a further 4.9% in April from March to 2,721 apartments. At the same time, the inventory of new apartments fell 5.1% to 8,830 apartments. Apartment sales rose 1.3% in April to 1,342 apartments.
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2010
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