19 TH FEBRUARY, 2020

Bottom line: The economy is stable and nothing remarkable happened in the fourth quarter. Growth in the period July 2018-December 2019 was around the level of 3.5%, driven by rapid consumption growth – fueled by both higher wages and increasing debt – and by services exports.

The volatile quarterly data throughout 2019, which made the fourth quarter look especially strong, reflect sharp rises and falls in vehicle purchases, by both households and companies. Neutralising the distorting effect of these swings produces the picture presented above.

  • Gross Domestic Product (GDP) expanded by 4.8% in Q4 2019, the best quarterly performance since Q2 2017. For H2, GDP increased by 3.8%, after 3.6% in the first half. All data are on an annualised basis, after seasonal adjustment.
  • Growth was driven primarily by private consumption, which rose 10% (7.8% on a per capita basis). Once again, purchases of new vehicles was the key factor, driving up consumption of durable goods per capita by 54% per capita.
  • GDP excluding net taxes on imports (primarily new vehicles) was 3.3% in Q4, down from 4.0% in Q3 and in line with the trend in 2018/19.
  • Vehicle purchases was also the main factor behind the 8.7% increase in investment – because firms spent NIS4.5bn on purchases of passenger cars (only ever beaten by the NIS5bn in Q1 2019).
  • Private consumption was also boosted by a 12% rise in purchases of semi-durable goods (clothing, furniture).
  • Government consumption was flat (up 0.9%) and, without defence imports, would have been negative.
  • Investment other than new vehicles was patchy: residential construction fell, but investment in intellectual property products and in ICT (information technology) rose smartly.
  • Imports and exports both rose, but imports rose more (6.8%) than exports (2.4%), so the contribution to overall GDP from the external sector was negative.

OUTLOOK: Negative

  • The lack of a state budget for 2020 will constrain government expenditure.
  • The coronavirus will hit tourism and trade.
  • Supply chain disruptions may impact both production and consumption.


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