JERUSALEM Israel’s economy shrank by an annualised 28.7% in the second quarter, hit hard by the COVID-19 pandemic that has led to mass job losses and weaker consumer spending, trade and investment.
Preliminary data from the Central Bureau of Statistics on Sunday showed the contraction in gross domestic product for the April-June period over the prior three months was steeper than the -22% analysts forecast in a Reuters poll of economists.
It also showed Israel is in a recession, after the economy contracted by 6.8% in the first quarter.
“The contraction in the second quarter was relatively modest compared to other developed markets,” said Leader Capital Markets Economist Jonathan Katz, pointing to steeper declines in the United States and across Europe.
A contraction of as much as 6% is projected in 2020, which would be the first annual contraction in Israel’s history.
Much of that stems from a coronavirus lockdown from March and April that forced many businesses to close. After hitting 27%, the unemployment rate has eased to 21.6%.
In the second quarter, exports fell 29.2%, while private spending slid 43.4%; imports dropped 41.7% and investment in fixed assets was down 31.6% – with residential building down 41.6%.
Prime Minister Benjamin Netanyahu offered a more positive view of the GDP data, pointing to a 7.8% contraction over the second quarter of 2019.
“That’s half the decline of the countries in Europe (and) almost one of the smallest declines in the world,” he said in a statement.
Netanyahu has faced street protests over alleged corruption and the economic hardship that has ensued during the pandemic, despite a series of stimulus packages. On trial for bribery, breach of trust and fraud, he has denied wrongdoing.
One bright spot for the economy was a 25.2% jump in government spending.
Katz noted another positive was a 5.5% increase in non-tourism exports after a drop the prior quarter – reflecting solid demand for Israeli high-tech services such as cyber security and information technology.
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