2006: Bank of Israel's growth forecast 4.3%

The Bank of Israel released last week its 2006 growth forecast for GDP of 4.3%, and the growth forecast for business-sector product is 5.4% 
 
Exports are expected to increase by 6.5% in 2006, slightly below the forecast expansion of world trade, partly due to the slow growth of exports in 2005. Per capita consumption, which rose more slowly in the first half of 2005, is expected to increase relatively rapidly in 2006, by 2.4%, because of the expected rise in disposable income resulting from the persistent improvement in the labor market and the tax reductions.
 
Fixed investment is expected to rise by 4.5%––following its standstill in 2005 and continuous reductions in the last few years––in particular due to an expected rise of investment in residential construction. The fundamental assumptions underlying the forecast are that domestic public consumption will move in accordance with the government's expenditure target, and that the security situation will remain stable.
 
According to the Bank the greatest threat to Israel’s economic growth in 2006, comes from the global economy, especially the ongoing rise in fuel prices.
 
The Bank of Israel noted, “The slowdown in the rate of growth in the demand for Israeli exports in general, and the fall in exports of mixed technology and traditional products in particular, which were partly due to the slowdown in the growth of world trade, worked to slow the growth rate of GDP in Israel.