Israeli economy growth rate slips to five-year low

The estimated growth rate of the Israeli economy in 2014 was the lowest in the past five years, as the 50-day war against Hamas and other Gaza terror groups weighed down heavily on the finances of investors, consumers and factories in Israel and abroad.

The economy expanded by a mere 2.6 percent, as opposed to 3.2% in 2013, but the final measurement exceeded an earlier prediction by the Bank of Israel, which estimated an increase of only 2.2% in 2014. Israel also outperformed most other developed countries, placing above the 1.8% average growth rate in OECD states.

Experts at the Bank of Israel assessed that despite 2014’s low figures, the Israeli economy would gain momentum in the coming year, with a growth expectancy of 3.2%, Reuters reported.

“Without the war, GDP would have been much higher,” Oz Shimony, senior director of the Bureau of Statistics’ macroeconomics department, told Reuters.

The estimated GDP per capita in 2014 rose by 0.7%, half a percent below the average increase in OECD member countries. Private consumption rose 3.8% in 2014, though private consumption per capita increased by 1.8%, according to Israel’s Bureau of Statistics.

The phenomenally low interest rates in Israel, which the central bank dropped earlier this year from 1% to 0.25%, are expected to remain stable until at least 2016, according to Reuters.

Israel’s Manufacturers Association estimated the total economic impact of the military operation in the Gaza Strip on Israeli manufacturers to be about $336 million. Israel’s tourism industry lost at least $566 million after tourism dropped by 26% over last year for the month of July.

Adiv Sterman contributed to this report.