The Israeli economy grew by one percent annually in the second quarter, making the Jewish State one of the first countries in the world to come out of the global recession. Analysts were surprised by the statistics, which were released Sunday. They had expected the economy to show no growth until the next quarter, following negative growth in the fourth quarter of last year and the first three months of this year.
Monday morning, Japan also announced it is coming out of the recession.
"The data ... are evidence that the situation of Israel's economy is better than that of other leading economies in the world," Prime Minister Benjamin Netanyahu said.
Clal Financial investment economist Ori Greenfeld was more reserved, saying that “Israel's economy is surely on its way out of the financial crisis, but the growth that was published needs to be taken with a grain of salt.”
The Central Bureau of Statistics (CBS) also revised first quarter gross domestic product to a contraction of 3.2 percent from 3.7 percent. For the first half of 2009, the economy shrunk by 1.7 percent, and the Bank of Israel has forecast negative growth of 1.5 percent for all of 2009. The surprise growth rate in the second quarter probably will cause more optimistic revised estimates.
Bank of Israel Governor Stanley Fischer’s current headache is the interest rate, which he has kept near zero despite a spike in inflation. The consumer price index for July soared by 1.1 percent, and the annual rate is around 5 percent, far above the accepted maximum norm of 3 percent.
Raising the rate could discourage spending and would put downside pressure on the shekel-dollar rate, which would damage exporters whose dollar income from American importers would hurt profits after being converted into shekels at a relatively low exchange rate.
Consumer spending in the second quarter soared by 4.4 percent on an annual basis after dropping 3.9 percent in the previous quarter.
An optimistic sign for Israel’s unemployed came on Sunday from Tower Semiconductor, which is moving to a five-day work week on a bi-weekly basis after having switched to a four-day work week earlier this year, when it also fired hundreds of workers.
Tower is now working at 70 percent of production capacity, compared with only 40 percent in the first six months of this year.