The Central Bureau of Statistics found that the first quarter of 2016 saw a 0.8% growth in Israel’s economy, a low number that in actuality represents a negative growth when compared to the 2% growth in population.

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The Ministries of Finance and Economy were surprised by the data, as the Finance Ministry had expected a 2.8% growth. In light of the worrying information, Minister of Finance Moshe Kahlon is due to call a meeting with the head officials of the ministry regarding how to raise the rate of economic growth in the upcoming quarters.

Kahlon and Netanyahu (Photo: Alex Kolomoisky)

Prior to the current report, officials from the Ministry of Economy had warned that having a bi-annual budget might hinder economic growth, and that it was preferable to work under a yearly budget. The issue is expected to be raised during the upcoming meeting.

The decrease in economic growth follows a relatively high growth rate of 3.1%, seen during the last quarter of 2015. Despite the relatively low growth rate during the first quarter of 2016, private consumption was shown to have gone up by 4%.

The business sector, however, saw a negative growth rate of 0.4% during the first quarter of 2016, after a 2.9% rise during the previous quarter. Additionally, export rates have gone down by 4.4%. When removing the diamond industry and hi-tech companies from the total equation, the decrease in exports was found to be 12.9%.

When an industry suffers a decrease in exports, it can enter a recession and be forced to fire people working to manufacture their products.

The tourism industry, on the other hand, saw an increase of 34.1% during the first quarter of 2016 based on a yearly calculation (or 7.6% based on a quarterly calculation) and a 26.3% yearly-based increase (or a 6% quarter-based increase). Israel’s diamond export also went up to a 35.3% based on a yearly calculation (or a 7.9% increase based on a quarterly calculation).

The first quarter saw a 7.5% growth in imports, a relative drop when compared to the previous quarter’s 20.9% growth. The first quarter also saw a 15.9% increase in importing merchandise for the private sector and an 11.2% increase in the import of services, including software and tourism. Defense imports, however, saw a 13.2% drop during the first quarter. Excluding defense imports, the first quarter saw a 0.4% increase of importing goods and services, after the previous quarter saw a 23.7% yearly-based increase.

The first quarter also saw a 3% increase in private consumption, which includes spending on food, alcohol and tobacco, private services, housing, fuel and electricity.

Spending on durable goods has remained stable during the first quarter following a 55.7% yearly-based increase (and an 11.7% quarterly-based increase). Household equipment saw a 6% yearly-based decrease after a 40.2% increase during the last quarter.

Pioneer Wealth Management’s Head Investment Manager Shmuel Ben Arie stated that the general drop is due to “the Bank of Israel and the government falling asleep on the job.” He continued, “Israel hasn’t shown almost any encouraging signs of growth, and the government hasn’t issued any tax cuts or new investments.”

Idan Azoulay, the CEO at Epsilon Investment House, added, “The current data need to be taken as a wake-up call by the government. It’s time the government begin implementing a policy that supports the business sector and investments.”

“Our export is looking bad,” said Guy Yehuda, a senior economist at Psagot Investment House. “When exporting becoming so concentrated, and with Teva, Intel and ICL comprising half of it and showing most of the total decrease, it’s really a story concerning the micro level of the economy, rather than one of the economy in general.”