Bottom line: The economy, as measured by GDP, grew by 3.3% in 2019 – similar to, if slightly less than, the previous two years.  But only consumption is driving growth, with investment at a multi-year low and exports and imports both growing slowly. In 2019, the revaluation of the shekel gave real income growth an extra push, helping consumers buy new cars and take more holidays. This year, that ‘bonus’ will not be available, while public expenditure will be reduced by the absence of a state budget. These factors, and the slowdown in global trade, point to slower growth ahead.

  • Gross Domestic Product (GDP) expanded by 3.3% in 2019, the third successive year of gradual decline – after 4% growth in 2016, GDP rose by 3.6% in 2017 and 3.4% in 2018.
  • GDP less start-up companies was 3.0% in 2019, 0.3% less than overall GDP. This is the largest-ever gap between these two measures and highlights the growing importance of start-ups to the Israeli economy.
  • Growth continues to be driven by consumption, both private (+3.9%) and public (+4.1%). Private expenditure was again driven by vehicle purchases, which boosted spending on durables by 6.1%, while spending on semi-durables and on current expenditure rose 3.4% and 3.6% respecti
  • Consumption received an extra boost from the rise in the shekel against all major currencies during 2019. This generated a rise in real income of 4.5% — 3.3% from GDP and 1.2% from ‘trading gains’, i.e. revaluation.
  • Investment eked out a gain of only 0.9% — even that mainly thanks to a rise in inventories –marking the slowest growth in the last six years.
  • Imports of capital goods fell sharply, reflecting the completion of major investment projects – the Leviathan gas field and the new Intel plant – while no new ones have replaced them.
  • Exports and imports both grew modestly – by 3.3% and 3.4% respectively – impacted by a sharp contraction in the diamond sector and by the general weakness in world trade.
  • Export growth came almost entirely from services exports, which rose 9%, while exports of manufactured goods managed only a 1.5% gain.

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