2014-03-17 07:09:03 - Israel Business Forecast Report Q1 2014 - a new country guide report on companiesandmarkets.com
Political risks remain elevated, despite a reduced likelihood of an attack on Iran and Syria. Indeed, spill over effects remain high and thus investors´ risk appetite may be tempered as a result.
We project consumer price inflation (CPI) averaging 1.9% and 2.3% in 2013 and 2014, respectively, from 1.7% in 2012. Relatively modest inflationary pressure will allow the Bank of Israel (BoI) to keep interest rates low, which we forecast to come in at 1.00% at end-2013 and 0.75% at end-2014.
We project real GDP growth in Israel to come in at 3.5% in 2013 and 3.2% in 2014, respectively, down from our previous forecasts of 3.7% this year and 3.8% in the next. Despite the beginning of natural gas production in
the Tamar gas field in H113, the economy will remain in a soft patch, with export growth remaining slack as a result of slow growth in key export markets, while fiscal austerity will hit consumer demand in H213 and 2014.
House prices in Israel have risen rapidly in recent years, raising concerns that a bubble has formed in the property market. However, an increase in supply, coupled with macroprudential measures on the part of the government designed to bring down prices, have seen the market cooling in the past quarters. As a result, a sharp drop in prices is unlikely at this stage.
A sharper-than-expected downturn in the global economy would hit Israel´s economy badly. Exports have already been hit by stagnant demand in Europe and the US, and a further slowdown in external demand would see the outlook for exports deteriorating even further.
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