Summary:
After two years in which economic activity contracted, against the backdrop of the exacerbation of the armed conflict with the Palestinians and the global economic slowdown, the deterioration was checked in 2003, and a positive trend emerged thanks to the relative easing of the security situation and the global economic recovery. Business-sector product grew by 1.8 percent, after declining by 2.8 percent in 2002, and labor productivity rose by 1.5 percent.
Alongside the signs of recovery, which multiplied in the second half of the year, aspects of the slump were still in evidence, however: fixed investment continued to shrink, and the sharp contraction of inventories persisted; wages in the business sector declined in both nominal and real terms, and unit labor costs fell by 3.6 percent; the rate at which new jobs were created did not accelerate, Hours worked did not increase, and the unemployment rate rose to 10.7 percent.
The turnaround that emerged in the course of the year was supported by an appropriate economic policy mix: the government slashed public spending, as a necessary precondition for returning to a declining budget deficit and debt path, and initiated structural changes designed to accelerate the recovery and support sustainable growth. The gradual reduction of the Bank of Israel's key interest rate, by a cumulative 3.9 percentage points during the year, served to ease monetary restraint while maintaining financial stability.
After two years in which economic activity contracted, against the backdrop of the exacerbation of the armed conflict with the Palestinians and the global economic slowdown, the deterioration was checked in 2003, and a positive trend emerged thanks to the relative easing of the security situation and the global economic recovery. Business-sector product grew by 1.8 percent, after declining by 2.8 percent in 2002, and labor productivity rose by 1.5 percent.
Alongside the signs of recovery, which multiplied in the second half of the year, aspects of the slump were still in evidence, however: fixed investment continued to shrink, and the sharp contraction of inventories persisted; wages in the business sector declined in both nominal and real terms, and unit labor costs fell by 3.6 percent; the rate at which new jobs were created did not accelerate, Hours worked did not increase, and the unemployment rate rose to 10.7 percent.
The turnaround that emerged in the course of the year was supported by an appropriate economic policy mix: the government slashed public spending, as a necessary precondition for returning to a declining budget deficit and debt path, and initiated structural changes designed to accelerate the recovery and support sustainable growth. The gradual reduction of the Bank of Israel's key interest rate, by a cumulative 3.9 percentage points during the year, served to ease monetary restraint while maintaining financial stability.
- Output and the Principal Industries - PDF file
Main Developments
Aggregate Demand and Supply
The Real Exchange Rate, Saving and Investment
The Principal Industrie - Main developments - Complete text - PDF file
- Manufacturing - Complete text - PDF file
- Agriculture - Complete text - PDF file
- Transport and communications - Complete text - PDF file
- Construction - Complete text - PDF file
- Commerce and services - Complete text - PDF file
- The information and communications technology (ICT) industry - Complete text - PDF file