The slowdown in the Israeli economy may be indicative of a longterm trend, according to Bloomberg.
“With exports tumbling and annualized inflation stuck below zero for 20 months, growth in 2015 slowed to just over 2 percent from 5 percent or more five years ago,” Bloomberg stated in a new analysis.
First quarter growth was only 0.8 percent, alarmingly below the analysts’ expectations of 2.6 percent . “Lackluster expansion may be the new normal,” Ministry of Finance chief economist Yoel Naveh told Bloomberg, attributing it to a labor shortage in the high-tech sector, and downturn in Israeli exports.
Bloomberg pointed to multiple causes for the low growth in Israel. At the top of the list is the defense-heavy budget which allows less for education, health and transportation, putting Israel behind OECD countries in those areas.
Other challenges facing the Israeli economy are declining productivity and the strengthening of the shekel against foreign currencies. The current account surplus, which is usually an asset, and the discovery of natural gas have led to an ongoing appreciation of the shekel, which adversely affects exports.
In other economic news, El Al Airlines on Thursday published disappointing results for the first quarter of the year. Revenue declined from $419.8 million in the first quarter of 2015 to $396.5 million in the first quarter of 2016, Globes reported.
But it’s not as bad as it looks. The company explained that the first quarter this year did not include the Pesach season, which will lift its second quarter results, and was also affected by the winter season, traditionally a slow time for the company. El Al’s net loss grew from $16 million in the first quarter of last year to $21.4 million in the first quarter of this year.
Two months after launching direct flights between Tel Aviv and San Francisco, United Airlines announced on Thursday that it was increasing the frequency of its flights on the route from three a week to one flight daily.
Daily flights are scheduled to begin in early October of this year on Boeing 787 Dreamliners.