Israel’s economy is shrinking, according to a revised estimate released in a report Thursday by the Central Bureau of Statistics.
According to the revised estimate, the country’s GDP shrank by 1.9 percent on an annualized basis in the first quarter of this year.
This second estimate was even worse than the first, which reported the GDP had contracted by 1.6 percent.
Israel economy was doing well in the fourth quarter of 2021, with an annualized growth rate of 15.6 percent, and in fact has grown 8.9 percent in the 12-month period between the first quarters of 2021 and 2022.
But then came the fall: GDP per capita dropped by an annualized 3.5 percent in the first quarter of this year.
Private consumption fell 1.5 percent – more than double the first estimate of 0.7 percent.
That, despite an 18.2 percent jump in private consumption in the final quarter of 2021.
Inflation over the past year – from May 2021 to May 2022, was at 4.1 percent, according to the Bank of Israel, which noted it rose higher than the inflation target of 1 to 3 percent.
The Bank reported last week that the shekel weakened by approximately 2.1 percent against the US dollar, and by approximately 0.1 percent against the euro.
Last month, the Bank’s Monetary Committee raised the interest rate to 0.75 percent, citing concern that global developments, “particularly the war in Ukraine and the slowdown in activity in China as a result of the lockdowns,” may have negative impact on economic activity.
During the first quarter of this year, institutional investors (pension funds, provident funds, and insurance companies) acted contrary to their trend of the previous two years and made net purchases of foreign currency totaling about $12.4 billion.
The good news: the business sector made net sales of foreign currency totaling about $7 billion, and nonresidents continued to act in line with the long-term trend, making net sales of about $5.1 billion.