Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

1 Sivan 5761 - May 23, 2001 | Mordecai Plaut, director Published Weekly








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Israel's GDP Rose in the First Quarter
by Mordecai Plaut

Israel's gross domestic product (GDP) increased at an annualized rate of 1.7 percent during the first quarter, compared with a 9.8 percent drop in the fourth quarter of 2000, the Central Bureau of Statistics (CBS) reported on Monday. A year ago, it was up 6.5 percent in the first quarter.

The CBS attributed the gain to a 10 percent increase in private consumption. It also said that investments in fixed assets jumped 33.7 percent, while general investment increased 12.2 percent, compared to falling 12.5 percent in the same quarter last year. It appeared that the economy was recovering from the shock of the Palestinian violence that began just towards the end of the third quarter of 2000.

Observers agree that the problems of the Israeli economy are due to two main factors: the technology crash in America and on the American stock markets, and the Palestinian violence known as the Al Aqsa Intifadah. However, no one has so far been able to determine the extent of the individual contribution of each one.

Per capita GDP dipped 1.1 percent because of the increase in population from births and immigration, after plummeting 12.2 percent in the previous quarter. Business sector GDP gained 2.5 percent, compared to a 16 percent fall in the final quarter of 2000. According to the CBS, the slowdown in the economy this year was mostly attributable to faltering technology start-ups, without which the GDP would have risen 4.2 percent in the quarter.

Overall 2000 GDP growth was 5.9 percent -- all of it in the first three quarters. Last year began with an unprecedented growth of 11.25 percent in the first quarter, but ended with a sharp drop of 9.8 percent in the last quarter after the outbreak of the Intifadah. Both the Finance Ministry and International Monetary Fund expect it to be positive but they predict it will only reach 1.5 percent-2 percent this year. However, the Finance Ministry expects growth to accelerate, and expects that the fourth quarter will show a more robust rate of growth.

Before the violence and the Wall Street problems, economic growth had been forecast to reach 6 percent this year.

Israel's GDP per head now stands at $17,606, down from a peak of $18,645 in the third quarter of 2000. These levels place Israel at a respectable place in the hierarchy of economically developed countries.

Exports of goods and services, excluding start-ups, dropped in the quarter by 14.0 percent, following a sharper drop of 18.9 percent in the previous quarter. Diamonds and agricultural goods accounted mostly for this significant drop, while industrial exports remained almost unchanged. The Palestinian violence was particularly disruptive to the agricultural sector since Palestinians make up a large part of the labor force that does the harvesting.

Private consumption grew 10.0 percent in the first quarter, while consumption per head was 6.9 percent up.


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