The Central Bureau of Statistics today published its growth forecast, which includes especially worrying figures. It forecasts 3.4% GDP growth in 2013, the same as in 2012. The Bank of Israel forecasts 3.8% growth this year. The Central Bureau of Statistics also forecasts that business product, the engine of economic growth, will grow by 3.5% in 2013, barely changed from the 3.4% growth in 2012.
The growth mix is very worrying, and indicates the economy's problems. Firstly, the Central Bureau of Statistics sees no growth in exports (excluding diamonds), an important growth engine, due to the recession in the eurozone and low growth in the US. It forecasts a 3.6% drop in industrial exports in 2013, which will be offset by more than 9% growth in services exports (excluding tourism). Tourism services exports are barely changed in 2013.
More worrying is the forecast of a 1% drop in housing construction in 2013. Investment in housing can shed light, and even partly explain the surge in home prices: the growth in housing construction fell from 13% in 2010, to 12% in 2011, 5.4% in 2012. There was a sharp drop in housing construction in 2009.
Growth in investment in fixed assets is projected to fall to 2.4% from 3.5% in 2012 and 16% in 2011. The drop in investment is one of the most worrying indicators. The Central Bureau of Statistics also forecasts that the growth in investment in economic sectors will to fall to 3%.
This means that economic growth in 2013 will come from public investment, i.e. government intervention, which is projected to grow by 2.3%. The Central Bureau of Statistics projects a small 0.3% drop in defense consumption.
The only positive development in the Central Bureau of Statistics data is 4% growth in private consumption in 2013, more than in both 2011 and 2012. The standard of living is forecast to rise by 2.1% in 2013 from 1.4% in 2012. More important is the increase in private consumption of durable goods to 3% in 2013 compare with the 1.7% drop in 2012.
Imports also indicate an economic slowdown. The Central Bureau of Statistics forecasts imports will be 2% less in 2013 than in 2012. It predicts that imports excluding diamonds, ships, planes, and defense will fall by 3.6% compared with 2012.
Despite Israel's economic slowdown, its growth rate in 2013 is projected to be well above the OECD average of 1.2%, and the 0.6% contraction in the Eurozone.
Published by Globes [online], Israel business news - www.globes-online.com - on September 16, 2013
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