Israel’s economy showed resilience in the face of recent challenges, surpassing growth expectations in the third quarter of the year. This positive trend comes on the heels of a testing period following conflicts with Hamas in Gaza and heightened geopolitical tensions. The recent economic data suggests that interest rates in Israel are unlikely to decrease in the near future.
Key points from the economic report include:
– Gross domestic product (GDP) expanded by an annualized rate of 3.8% in the July to September period, surpassing the 2.9% consensus forecast.
– On a per capita basis, GDP saw a growth of 2.6% during the quarter.
– Consumer spending surged by 8.6%, while investment in fixed assets, particularly in residential building, increased by 21.8%.
– Despite a decrease in government spending by 10.8%, exports rose by 1.7%, contributing to overall growth.
– The business sector alone saw a growth of 5.4% in GDP in the last quarter.
The ongoing conflicts with Hamas in Gaza and Hezbollah in Lebanon have impacted Israel’s economic landscape. Inflation has remained stubbornly high at 3.5% in September, above the government’s target range of 1-3%. The government attributes this spike to war-related supply issues at a time when global inflation is generally easing.
Looking ahead, the Bank of Israel is scheduled to make a decision on interest rates on November 25. Despite several rate cuts earlier in the year, recent meetings have seen the central bank maintain the rate unchanged due to geopolitical uncertainties and inflationary pressures. Israeli policymakers have signaled that while further rate decreases are improbable, high inflation rates may necessitate future rate hikes.
In conclusion, Israel’s economy has shown resilience in the face of challenges, maintaining a steady and improved growth trajectory. The country’s economic outlook remains optimistic, with a cautious approach to interest rate adjustments in light of prevailing geopolitical tensions and inflationary pressures.
