Most Arrows Pointing Downward on Economy

YERUSHALAYIM -

Whatever the final makeup of the next Israeli government, it will have its work cut out for it; not only in addressing the issues of national security and the draft but in getting the economy going again.

The slowdown trend in the Israeli economy continued in the beginning of 2013, according to the Finance Ministry’s monthly “Red Lights” assessment, Ynet reported on Wednesday.

The arrows were almost all pointing downward: The export of goods fell 2.8% in January, the export of services dropped by 4.5% in December, and the labor force participation rate was down 0.3%.

The growth rate, a major indicator, stood at just 2.5% in the fourth quarter of 2012. The Finance Ministry attributes the slowdown to Operation Pillar of Defense’s effect on investments in the Israeli economy and the negative developments in the global economy.

The report published in December, the growth in the third quarter dropped to 2.9%, following a 3.1% growth in the second quarter and 3.4% in the first quarter. The revenue index of trade and services for September recorded a sharp decline, and a drop was also registered in the manufacturing production index.

The housing sector continued to perform weakly, showing a drop in the demand for apartments alongside a slight rise in building starts. According to the Treasury figures, January 2013 saw a 15% drop in the number of transactions, which were still 22% higher compared to the beginning of last year, which was affected by the social protest that led to a freeze in the housing market.

The fourth quarter saw an impressive rise in the number of building starts, but that increase only slightly compensated for the slowdown trend in the market, which has been felt since early 2012.

Meanwhile Sunday, the Central Bureau of Statistics (CBS) revised its initial assessment of economic growth in 2012. According to new amended figures, the Israeli economy grew by only 3.1% in 2012, compared to 4.6% in 2011 and 5% in 2010.

Gross domestic product per capita (a figure reflecting the rise in the standard of living in the country) went up by 1.2% in 2012, following a 2.7% increase in 2011 and a 3.1% increase in 2010.

According to the CBS report, the economic slowdown stemmed mainly from a 5.7% drop in the consumption of consumer durables per capita, which was reflected mostly in a drop of more than 10% in the purchase of vehicles.

A slowdown was also felt in the investment in fixed assets, which increased by just 3.6% in 2012, following a 16% increase in 2011.

A rise in the government deficit also reflected the slowdown. National debt reached 4.7% of GDP, including the deficit in the government’s capital account. The deficit stems from a 7.1% increase in the government’s current expenses, compared to a 3.7% rise in the current income.

There were some bright spots, but not all that bright. Although Israel’s unemployment rate fell to 6.5% in January, the Finance Ministry report said it was due more to the decline in the labor force participation rate than to the rise in the number of people employed.

“The drop in the unemployment rate was reflected in a drop of 10,700 people in the jobless rate, alongside a minor increase of 600 people in the number of employed,” the report says. “The rise in the number of employed Israelis is reflected in a rise in the number of part-time workers, which was partially compensated by a decrease in the number of full-time workers.”

The Stock Exchange’s performance was encouraging. Earlier this week, the Tel Aviv Stock Exchange reached an 18-month high for much of the trading session. News of an agreement to solve Nochi Dankner’s debt troubles also helped at midweek.

The economic slowdown restrained the inflation rate, with the consumer price index recording a 0.2% drop in January. The inflation rate in the past 12 months totaled 1.5%, way below the government target of 2% a year.