Blowing past the revised, optimistic forecasts of the Bank of
Israel and the Finance Ministry, the preliminary figures
released by the Central Bureau of Statistics (CBS) showed
that the Israeli economy grew at an annual rate of 5.5
percent in the first quarter of the calendar year. The CBS
said that the figures may be revised, and should generally be
interpreted with caution since there can be significant
variation from quarter to quarter.
The Bank of Israel's most recent forecast was for 3.4 percent
growth for all of 2004, while the Finance Ministry projected
2.8 percent growth, though in recent days there were reports
that this would be revised upward. The higher quarterly rate
may be balanced by lower growth in subsequent quarters. In
the last quarter of 2003, the economy grew at 2.5 percent.
Certainly much of the credit will go the Finance Minister
Netanyahu, both for the policies that he has pursued and for
the atmosphere of confidence that he has created that the
Israeli economy is in the hands of someone who knows what to
do and can get the job done. Besides the sectors involved,
the rest of the economy is certainly very encouraged to hear
him talk of breaking the pricing power of the longshoremen,
of the banks, and of the Israel Lands Administration.
The increased growth will probably translate into increased
revenues for the government. However, after the recent tax
cuts that were announced, any additional revenues will
probably be used to pay down the national debt that is very
high by current Western standards.
An idea of the swings that are common from quarter to quarter
may be had by considering the figures for last year. In the
fourth quarter of 2003, the economy grew by 2.5 percent. It
grew by 2.8 percent in Q3 2003, by a negative 1.1 percent in
Q2, and by 3.3 percent the first quarter of that year.
Increased efficiency in the business sector led to a 9.2
percent jump in commercial production in the most recent
quarter, compared to 3.6 percent growth in the last quarter
of 2003. Private consumption rose by 5 percent, and the
standard of living (consumption per capita) grew by 3.4
percent after falling in 2003.
The first-quarter increase in gross domestic product (GDP)
reflects an increase in all sectors. Goods and services
exports rose by a steep 49.5 percent due to a sharp increase
in industrial exports (73.2 percent) and diamond exports
(39.1 percent). In addition, there was an unusually large
increase in agricultural exports (31.5 percent).
In the last quarter of 2003, goods and service exports
dropped by 7.8 percent after a remarkable 21.2 percent
increase in the previous quarter, a 1.2 percent increase in
the second quarter of 2003, and a 9.1 percent increase in the
first quarter.
Investments also went up by 6.1 percent, following declining
figures throughout last year.
The first-quarter growth rate is the highest since Q3 2000,
right before the start of the intifadah.
Generally speaking the increase in the business sector is
considered a very healthy one, since it is attributed to an
upsurge in industrial and commercial activity, including
catering and accommodation services, and most of the
financial and business services.
The CBS said that sharp fluctuations in quarterly data make
it difficult to analyze trends, and especially to locate
turning points in economic activity. This year's first-
quarter estimates will be revised in the upcoming months, as
new data comes in.
It is important to keep in mind that the comparisons are to
Q1 2003, during the American invasion of Iraq, when the
economy was seriously depressed by the lead up to the
invasion and the invasion itself.
