According to a recent report of the Central Bureau of Statistics of Israel (CBS), Israel ‘s GDP in the second half 2011 expanded by only 3.6% (year-o-year) which is a much slower pace than the growth rate of 5.3, which was recorded during the first half of 2011.
The Israeli Gross Domestic Product has expanded, after controlling for seasonality and at fixed prices by 3.6% in annual terms during the second part of 2011. This is a smaller growth rate than the one recorded during the second part of 2010, back when the Israeli GDP grew by 5.8%.
During the fourth quarter of 2011 the Israeli GDP grew by 3.2% compared with a growth rate of 3.8% during the Q32011 and by 3.9% during Q2 2011. As a comparison, the U.S. GDP expanded by only 2.8% during the fourth quarter of 2011, while the Euro Zone GDP declined by 0.3%.
This mean the while the Israeli economy isn’t expanding at the same high rate it once did in the previous quarters, at least it does a bit better than the leading economies.
The chart below shows the annual growth rate of Israel’s GDP during 2010 and 2011 and the Israeli basic interest rate.
The chart is compared with the interest rate as it might partially explain the economic slowdown in Israel during 2011. As the rate rose the economic activity may have slowed down. Of course there are additional factors such as the economic slowdown in Europe that may have adversely affected the Israeli economy.
One of the reasons for the higher growth in Israel compared with the growth rate of other leading countries’ GDP is due to the high population growth rate which is estimated at 1.9% in 2011. As a comparison, in the U.S. the population’s growth rate was nearly 1% in 2011.
There are still growing concerns of an economic slowdown in Israel during 2012: according to the current expectations of Bank of Israel the GDP will expand by only 2.8% in 2012.
This means that if the Israeli economy will continue to show signs of cool down Bank of Israel might intervene and further lower the interest rate during 2012.