Economic Analysis - Robust Domestic Demand To Push Growth Higher - APR 2018

BMI View: Israel's real GDP growth will accelerate in 2018 and 2019, owing to robust private and public consumption and rising fixed investment. That said, this robust outlook for domestic demand masks continued challenges faced by Israeli exporters, owing to the long-running appreciation of the shekel and the crisis of Teva, Israel's largest exporter.

Israel will see a steady uptick in economic growth in 2018 and 2019, and we forecast real GDP growth to come in at 3.7% this year and 3.8% in 2019, up from an estimated 3.5% in 2017. This acceleration in GDP growth will be driven by private consumption, which is benefiting from a dynamic labour market and low inflation, as well as fixed investment which will be boosted by strong residential construction, supported by record-high consumer confidence levels and public financial incentives. We also expect greater fiscal spending in anticipation of the 2019 parliamentary elections, adding a further impetus to growth. That said, we expect exports to underperform this year, especially non-extractive exports in light of the strong and appreciating shekel as well as ongoing cutbacks at Teva Pharmaceuticals - the country's largest exporting company.

Domestic Demand Will Remain Key Growth Driver

Consumption And Investment To Drive GDP Growth
Israel - Real GDP By Expenditure & Real GDP Growth
e/f = BMI estimate/forecast. Source: BMI, Central Bureau of Statistics

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