- Growth led by 4.5 percent increase in private consumption
- Exports fall 3 percent while investment drops 1.5 percent
Israel’s economy expanded slower this year than previously estimated as exports and capital investment declined, bringing growth to the lowest rate in six years.
Gross domestic product rose 2.3 percent from 2014, driven largely by private consumption, according to data released by the Central Bureau of Statistics at a press conference near Tel Aviv on Thursday, based on partial data for the year. The bureau previously estimated 2.5 percent expansion. In 2014, the economy grew 2.6 percent.
Weak economic activity in Europe, slowing growth in China, and the strength of the shekel all weighed on exports. Earlier this week, the Bank of Israel cut its growth estimate for next year to 2.8 percent, from 3.3 percent three months ago.
“The minute you have two central growth engines -- investment and exports -- declining, that is a problematic situation for the economy,” said Oz Shimony, head of macroeconomics at the bureau.
Exports fell 3 percent for the year, while capital investment declined 1.5 percent, the statistics bureau said. Private consumption rose 4.5 percent, and government consumption, blunted by a delay in the approval of the national budget, increased by 2.8 percent, it said. Gross domestic product per capita rose to $35,200, a 0.3 percent increase from the previous year.
The economy needs urgent government intervention to support growth, which has eased downwards over the past three years, said Shmuel Ben Arie, head of shekel investment at Pioneer Wealth Management.
Private consumption is being driven mainly by the central bank’s historic low interest rate, he said, and without steps such as cutting taxes, the economy could “be dragged into recession quicker than it would appear.”