In a macroeconomic forecast update for 2010 and 2011, the Bank of Israel today lowered its GDP growth forecast for 2011 to 3.8% from 4%.
Giving its reasons for the lower forecast the Bank of Israel said, "The rapid economic growth in 2010 and the low unemployment rate in the second quarter (6.2%) point to the continued narrowing of the “output gap” that had opened during the global crisis."
The Bank of Israel also expressed concerns about lower exports. The forecast said," Another reason for the downward adjustment of the 2010 growth forecast is the expected slowing of export growth to 5.8%, slightly under the foreseen growth rate of global trade of 7%. The downward adjustment of the growth outlook in the US, to which Israeli exports are particularly exposed, will contribute to this. The rate of increase in private consumption is also expected to decelerate, as the level of private consumption is very high today relative to GDP, also due to the adjustment of the inventory of durable goods."
However, the Bank of Israel raised its GDP growth forecast for 2010 from 3.7% to 4%. The Bank of Israel, headed by Governor of the Bank of Israel Prof. Stanley Fischer, noted, "Data showing strong growth of GDP and uses, coupled with the low unemployment rate in the second quarter, induced a slight upward adjustment of 2010 GDP, an upward adjustment of uses and imports, and a major downward adjustment of the unemployment rate."
The Bank of Israel also expects the average unemployment rate to fall to 6.3%, and expects the current account surplus to amount to $6.8 billion.
Published by Globes, Israel business news - www.globes-online.com - on September 28, 2010
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