Israeli economy still hasn't recovered from Gaza war, central bank says
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Israeli economy still hasn't recovered from Gaza war,
central bank says
Tourism
rebounding faster than expected, but exports are spotty, Monetary Committee
minutes say.
By TheMarker | Jan. 13, 2015 | 10:01
AM | 
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IDF soldiers facing Gaza
during Operation Defensive Edge, on Aug. 3, 2014. Photo by Reuters
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Israel’s
economy is recovering from the impact of last summer’s Gaza war, although the
losses sustained by the 50 days of fighting haven’t entirely been recovered,
the Bank of Israel said on Monday in minutes of its Monetary Committee meeting.
The
central bank said merchandise exports – not counting ships, aircraft and
diamonds – had declined in November by 3% after rising the previous two months,
while service exports were holding steady at the “peak levels” they reached at
the start of 2014.
Tourist
arrivals and overnight stays at hotels showed “some recovery,” the bank said,
and the recovery is occurring more rapidly than in previous rounds of fighting
with Hamas and Hezbollah in Lebanon.
On
Sunday, the government reported that tourist arrivals declined 1% last year
from 2013, with the number plunging 24% in the third quarter.
“Indicators
which became available this month [December] point to a recovery in activity
after Operation Protective Edge, with the economy’s expected return to its path
of growth from before the operation expressed in a relatively high growth rate
in the coming quarter,” the Bank of Israel’s minutes said.
The
assessment came before the five-member Monetary Committee voted unanimously on
December 29 to keep the bank’s key lending rate at a record low 0.25%. The
central bank slashed the rate over the summer from 0.75%, as the 50-day
conflict with Hamas forced factories and stores to close and caused tourists to
cancel visits during the peak summer season.
The
Central Bureau of Statistics said gross domestic product fell at an annual rate
of 0.4% in the third quarter, when Protective Edge was raging. It has not yet
published fourth-quarter figures, but at the end of December said full-year
2014 growth was 2.6%, the lowest in five years by 0.4 percentage points – more
than the bureau had expected.
Committee
members discounted concerns that deflation in Israel did not reflect declining
consumer spending and attributed it to external developments, such as plunging
global petroleum prices. The consumer price index will be low in January
because of cuts in water and electricity rates, but the committee noted that
these were one-time reductions.
Inflation
is expected to be 1.1% in 2015 (1.5% not counting water and power rate cuts),
which is at the lower end of the government’s target of 1% to 3% annually.
The one
area of concern the committee noted was for home prices, which increased 6.5%
in the 12 months to October 2014, up sharply from the 12 months through
September. Home sales and mortgage demand – which the Finance Ministry reported
on Monday jumped to 5.5 billion shekels ($1.4 billion) in December – continued.
But on
the positive side, the central bank pointed to a “sharp increase” in
construction starts and completions over the past 12 months, to 44,200 and
42,000 units, respectively.
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