Israel economy surges 7.2 percent in Q4, fastest pace since 2007

[February 16, 2015]  By Steven Scheer

JERUSALEM (Reuters) - Israel's economy expanded at its fastest rate in almost eight years in the fourth quarter, growing an annualized 7.2 percent in a rebound from a war-battered third quarter, official data showed on Monday.

Fourth-quarter gross domestic product had been forecast to grow an annualized 3.3 percent, according to a Reuters poll.

The recovery was seen in all segments, from exports to consumer and state spending to investment. It brought growth for all of 2014 to 2.9 percent, revised up from a prior estimate of 2.6 percent and just below 2013's pace of 3.2 percent.

The economy was hurt in the third quarter by the 50-day Gaza war in July and August, which curtailed factory output, kept consumers home and led to tourists cancelling in droves.

Still, growth in the July-September period was 0.6 percent, versus an earlier estimate of 0.4 percent and an initial reading of a 0.4 percent contraction.
 

The Israeli economy tends to recover quickly from conflicts. The last time the economy expanded as fast as it did in the fourth quarter of 2014 came in the first quarter of 2007, after a war in Lebanon held back growth in the fourth quarter of 2006.

Exports, which account for some 40 percent of economic activity, rose 7.3 percent in the fourth quarter, according to the Central Bureau of Statistics. Private spending, another key driver, grew 6.8 percent. Investment in fixed assets gained 8.7 percent, after declines the previous three quarters.

Government spending jumped 12.2 percent. The business sector GDP grew 8.8 percent in the fourth quarter.

Policymakers cited an apparent spurt in fourth-quarter growth when they left short-term interest rates unchanged for a fifth straight month in late January. That pointed to a "relatively good' state of the economy, they said, although they agreed the rebound was partly of correction after the third-quarter slowdown caused by the Gaza war.

The Bank of Israel expects 2015 growth of 3.2 percent. Its next rate decision is on Feb. 23.

The GDP data come a day after data showed deflation deepened in January to a 0.5 percent rate.

(Reporting by Steven Scheer; Editing by Tova Cohen, Larry King)

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