Jerusalem May 16 2022: Israel's economy shrank in the first quarter of 2022 after a robust 2021, but growth is expected to rebound during the year and help underpin central bank interest rate increases.
Led by declines in exports and consumer and government spending, gross domestic product shrank an annualised 1.6% in the January-March period from the prior three months, the Central Bureau of Statistics said on Monday. This was similar to a 1.4% decline in the U.S. economy in the quarter.
Israel's economy grew at a 21-year high rate of 8.2% in 2021 and is expected to expand a further 5.5% in 2022, according to the Bank of Israel. In 2021, the economy also shrank in the first quarter before rebounding sharply.
The data come after the bureau on Sunday said Israel's inflation rate reached 4% in April, the first time it has hit 4% since mid-2011.
The need to rein in inflation combined with a strong economy led the central bank a month ago to begin a tightening cycle. The benchmark interest rate was raised by a quarter-point to 0.35% and is expected to rise gradually throughout 2022. The bank's next policy decision is due out next Monday.
After sharp gains in 2021, private spending - the economy's main driver - declined 0.7% in the first quarter. Exports, another key growth driver, slipped 11% but excluding diamonds and start-up companies exports fell a smaller 6.1%.
Government spending dipped 7%, while imports rose 17.3%.
The lone bright spot was in investment, which rose 3.3% in the first quarter. All of that gain was in residential building, which more than offset declines in industrial investment.