Officials: ‘Car Bubble’ Can’t Sustain Economic Growth

Cars brought on cargo ships, imported from abroad, seen parked at the port in the Southern Israeli town of Ashdod, before being transported away for sale. June 23, 2014. Photo by Moshe Shai/FLASH90 *** Local Caption *** îëåðéåú áðîì àùãåã éáåà
Imported cars seen parked at the port of Ashdod, Israel. (Moshe Shai/Flash90)

Israel’s economy grew 3.2 percent in the third quarter – one of the best performances of any economy in the world – but don’t expect it to last, said the chief economist of the Finance Ministry in his weekly rundown of the Israeli economy. “The increase in GDP was due largely to two factors – the official opening of the $6 billion Intel project to modernize its Kiryat Gat factory, and the ‘car bubble’ due to the increase in the sale and import of vehicles.”

The number of car imports into Israel this year has already broken all previous records, and the year is not over yet – but the import of cars is representative, and the most important component of the consumer spending boom that has fueled the growth of the economy in recent months. However, there are already signs that this boom is faltering. In the third quarter, consumer spending accounted for 1.7 percent of third-quarter growth. In the first and second quarter, it was responsible for economic growth of 3.2 percent and 4.9 percent respectively.

“An examination of the components of growth in 2016 raises concerns that the current level of growth is unsustainable,” the Ministry said in its statement. The acquisition of cars, which has been the main engine of consumer spending growth, has hit its apex, the statement said, and as it falls, GDP could suffer. “There was a 70-percent fall in the import of cars in the third quarter,” it added. “Clearly this contribution to the economy is not sustainable.”