JERUSALEM: Israel’s economy put on a blistering burst of growth in the third quarter, expanding an annualised 37.9% as consumer spending, exports and investment took off after being hit hard by the coronavirus pandemic in the first half of the year.
The preliminary gross domestic product (GDP) growth figure for July-September over the previous three months issued by the Central Bureau of Statistics was well above the 24% consensus forecast in a Reuters poll of economists.
“The Israeli economy has been resilient due to strong hi-tech sectors and lack of flights, which pushed private spending up sharply,” said Leader Capital Markets Chief Economist Jonathan Katz, who expects a return to contraction in the fourth quarter.
On the other hand, second-quarter GDP was revised to an annualised contraction of 29.8% from a decline of 28.8%.
Overall, the Bank of Israel is projecting the economy will shrink as much as 6.5% in 2020 in the wake of the pandemic.
Israel went into an initial lockdown early in the year but with infections very low, the economy was opened almost fully in late May. However, infections began to spike over the summer and in September a second lockdown was imposed for a month, with stores largely closed and restaurants only operating delivery and take out services.
COVID-19 infections then dropped steeply and many stores have reopened this month as all businesses not in indoor shopping malls were allowed to reopen.
The bureau separately said that Israel’s jobless rate reached 18.2% in October, up from 12.4% in September. That follows Monday’s report that the annual inflation rate dipped to -0.8% in October from -0.7% in September.
Last Friday, Standard & Poor’s maintained Israel’s sovereign credit rating at AA- and kept a stable outlook. S&P said although the budget deficit and debt burden will jump, Israel benefits from a credible and effective monetary policy and a strong balance of payments.
Finance Minister Israel Katz said S&P’s decision to affirm its rating was a “great expression of confidence” in Israel’s economy and its policies.
In the third quarter, exports leapt 63.9% after a 28.5% drop in the prior three months. Similarly, private spending grew 42% to reverse a 43.7% decline and investment in fixed assets gained 7.3% after a 34.9% fall in the second quarter. Government spending rose 5.1% after a 22.7% decrease.
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