Israel’s economy remains robust. The country reported a 6.5% growth over the previous year. However, it’s slower compared to the 8.6% expansion shown in 2021. Still, Israel is still much more robust than most other Western countries. On Thursday, the Central Bureau of Statistics noted that solid growth in consumer spending, investment, and exports contributed to the strength of the economy.
The Finance Ministry and the Bank of Israel expected 6.3% growth full-year, but the actual number came higher than that. Meanwhile, economists forecast growth of 2.5% in the final quarter of 2022.
According to various data, OECD nations experienced an average growth of 2.8% last year. However, Israel’s economy expanded by 4.4% versus the 2.6% average of the OECD. The country will produce some $500 billion in 2022.
Moreover, a decline in mortality and immigrant influx from former Soviet states increased Israel’s population by 2.2% last year. The latter reached 9.66 million. According to the bureau, if such a rapid increase continues, the country’s population will likely hit 10 million in mid-2024. On the other hand, if it increases at a more normal pace (1.8%), it will reach the 10 million mark by the end of next year.
However, analysts expect Israel’s economic growth to slow this year. They forecast only a 3% increase. The central bank plans to announce new rate hikes, and that usually weighs on customer spending.
On Wednesday, the bureau reported that the inflation rate jumped to 5.4% in the country last month, hitting its peak in October 2008.
How will the Bank of Israel act?
The central bank hiked its benchmark interest rate from 0.1% to 3.75% in April 2022. It was trying to hinder soaring inflation. Economists think that policymakers will increase rates to 4%, at least. The next meeting is due on Monday.
Despite a high cost of living and inflation, consumer spending added a 7.5% gain to economic growth last year.