Tags: Israel | israel | economy | shrinks | gaza

Israel Economy Contracts in Quarter on Gaza Rocket Fire

Sunday, 16 Nov 2014 08:44 AM

Israel’s economy contracted for the first time in five years in the third quarter as thousands of rockets fired from the Gaza Strip kept tourists away and hampered production.

Gross domestic product shrank an annualized 0.4 percent, compared with a revised 2.2 percent increase in April through June, the Central Bureau of Statistics in Jerusalem said today. The median estimate of five economists was zero growth, according to data compiled by Bloomberg. The last time the economy showed negative quarterly growth was in 2009.

“Tourists didn’t come,” Ori Greenfeld, chief economist at Psagot Investment House Ltd. in Tel Aviv, said before the announcement. “Some factories didn’t work and others didn’t work at full capacity. People went out less.”

More than 4,500 rockets were fired at Israel from Hamas- ruled Gaza during July and August, with some reaching Tel Aviv and even further north. The conflict shaved about 0.6 percentage point off annual growth, which is expected to be about 2.4 percent this year, Finance Ministry official Yael Mevorach said Nov. 4. Last year, the economy expanded by 3.2 percent.

Growth, which had outstripped most developed countries after the global crisis, had slowed even before the third quarter. The Bank of Israel cut its benchmark rate at the end of both July and August, after reducing the benchmark 10 times since 2011 and purchasing foreign currency to weaken the shekel and help exports.

Growth Indicators

The shekel has slid by more than 10 percent against the dollar since the beginning of August, and was trading at 3.8123 on Nov. 14. It doesn’t trade today.

The central bank’s ‘S’ index of leading growth indicators suggested that growth had picked up in September.

Greenfeld said he doesn’t expect the Bank of Israel to trim the interest rate further at the end of the month.

“The situation is improving,” he said. “Industrial production improved, consumer demand is doing well. I think the Bank of Israel will wait and see what the Fed does.”


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Israel's economy contracted for the first time in five years in the third quarter as thousands of rockets fired from the Gaza Strip kept tourists away and hampered production. Gross domestic product shrank an annualized 0.4 percent, compared with a revised 2.2 percent...
israel, economy, shrinks, gaza
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2014-44-16
Sunday, 16 Nov 2014 08:44 AM
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