2014-01-05 21:17:47 - New Country Reports research report from Business Monitor International is now available from Fast Market Research
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.
Major Forecast Changes
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.
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Key Risks To Outlook
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.
Partial Table of Contents:
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
iran Deal causes Discomfort, But Military action unlikely
- Israel will continue to feel very uncomfortable with the deal between Iran and the 'Great Powers' over Tehran's nuclear programme, but will refrain from military action against the Islamic Republic for the next six months. As long as Iran and world powers appear to make progress on a rapprochement, an Israeli attack would cause widespread international condemnation, and risk an open break with the us.
taBLe: poLitica L outLooK
Long- term political outlook
Will Long-Lasting peace Be achieved?
- Over the next decade, Israel will continue to face external security threats from militant groups Hamas and Iran-backed Hizbullah. Downside risks to stability stem from the potential for renewed conflict with Hizbullah across Israel's northern border, although any peace settlement with the Palestinians would pose upside risks.
chapter 2: economic outlook
BMi economic risk ratings
Growth slowing in 2014
- We project real GDP growth in Israel of 3.4% and 3.2% in 2013 and 2014, respectively. Despite increasing exports in 2014, the domestic economy will remain in a soft patch, with austerity measures hitting private consumption hard. Increasingly expansionary fiscal policies and accelerating export growth underpin our relatively bullish medium-term outlook for the economy.
taBLe: GDp BY eXpenDiture
Flug's appointment Leading to policy continuity
- As a result of the appointment of the Bank of Israel's Deputy Governor Karnit Flug as the bank's governor, we expect broad continuity in monetary policy. Further rate cuts are on the cards in 2014, while intervention in the FX market will prevent further appreciation of the shekel.
taBLe: M onetarY poLicY
Struggling To Maintain Profitability
- Profitability in the Israeli banking sector will remain relatively modest despite positive Q213 results. Total assets will continue shrinking in 2013 as a result of decelerating loan growth.
Government stimulus to Drive Gcc outperformance
- The GCC will remain the outperformer across MENA's banking sector over the coming years. Whilst the GCC will experience a slowdown as the effects of government stimulus wear off, the outlook remains noticeably brighter than the rest of the region. We highlight Qatar and Saudi Arabia as key growth countries. Elsewhere, political risks in Iran and Libya will weigh heavily on the countries' growth potential.
taBLe: BanKinG sector oVerVie W
chapter 3: 10-Year Forecast
the israeli economy to 2022
Long- term outlook slow But steady
- We are forecasting steady, if unspectacular, growth for the increasingly developed Israeli economy over the long term. As ever, political risks pose downside risks to our GDP growth forecasts.
taBLe: Lon G-terM Macroecono Mic Forecasts
chapter 4: Business environment
BMi Business environment risk ratings
Business environment outlook
taBLe: BMi Business anD operation risK ratinGs
taBLe: BMi L eGaL FraMeWorK ratinG
taBLe: LaBour F orce QuaLit Y
taBLe: M ena - annuaL FDi inFLoWs
taBLe: traDe anD inVest Ment ratinGs
taBLe: top eXport Destinations
chapter 5: Key sectors
oil & Gas
taBLe: oiL proDuction, consu Mption anD net eXports, 2011-2016
taBLe: oiL proDuction, consu Mption anD net eXports, 2017-2022
taBLe: Gas proDuction, consu Mption anD net eXports, 2011-2016
taBLe: Gas proDuction, consu Mption anD net eXports, 2017-2022
taBLe : retaiL saLes inDicators, 2010-2017
other Key sectors
taBLe: pharMa sector KeY inDicators
taBLe: teLecoMs sector KeY inDicators
taBLe: DeFence & securit Y sector KeY inDicators
taBLe: inFrastructure sector KeY inDicators
taBLe: Foo D an D Drin K sector KeY inDicators
Full Table of Contents is available at:
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