Recent Economic Developments: October 2013 to March 2014

Full Hebrew Document

To Press Release as a Word document

  • The economy grew during the reviewed period at a slightly higher rate than that of the previous half year, net of the effect of the start of natural gas production in April 2013. The GDP growth estimates published by the Central Bureau of Statistics for the first quarter of 2014 point to decelerating growth during the reviewed period, but other indicators for the same period, particularly labor market data, do not indicate a deterioration.
  • During the reviewed period, the yield gaps between Israel and the other advanced economies narrowed, as a result of reestablished fiscal credibility and reduced geopolitical tension.
  • Inflation moderated during the reviewed period, but home prices continued to rise rapidly.
  • During the reviewed period, the government published tenders for the construction of two new terminals, at the Ashdod and Haifa ports. An analysis of the ports' usage trends shows that the construction work on at least one large terminal with capacity of 1.3 million TEU, or two small terminals as decided upon, should start immediately, and that the construction of the two small terminals rather than one large terminal will contribute to competition in the industry and to the quality of service, but at the cost of excess financing and depreciation expenses totaling NIS 400–800 million.
  • In recent years, securities trading methods have developed, in which the main innovation involves the use of trading algorithms for the purpose of automatic trading. These methods may contribute to improved liquidity in the financial markets, but may increase risks. Regulators must devote special attention to these changes, in order to evaluate their present and long-term effects.
  • Israeli-Palestinian trade is significant for the Palestinian economy. Palestinian purchases from Israel account for about two-thirds of total Palestinian imports, and Palestinian sales to Israel account for about 81 percent of total Palestinian exports. Trade with the Palestinian Authority is equivalent to only a small percentage of Israeli foreign trade. A preliminary translation of this section is available here.

Recent Economic Developments for October 2013 to March 2014, being published today (in Hebrew)[1] by the Bank of Israel, also includes an assessment of fiscal developments since the approval of the budget and their implications for the expected fiscal path. This assessment was published separately several weeks ago. In addition, two of the issues that appear in the review were already published: 1) The effect of terrorism, the security situation and economic variables on tourism and on the different types of tourists to Israel; and 2) The development of the ratio between the cost of housing and household income between 2004 and 2012.

 


[1] The English version is expected to be published early next week.