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The recovery if Israel's economy from the crisis became more firmly established in the period under review: exports expanded rapidly, and domestic demand increased. |
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The continued growth of economic activity in Israel depends on the pace of the global exit from the recession, about which there is uncertainty. |
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The initial signs of recovery from the recession are evident in Israel's labor market, with a slowdown in the contraction of employment and a decline in the unemployment rate. |
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The revival of economic activity is also expressed in the improvement in tax revenues since the middle of the year. Direct tax revenues increased with the revitalized activity in the capital market, the improvement in companies' profitability, the increase in the nominal wage, and the expansion in employment; indirect tax revenues increased faster than direct, as private consumption rose. |
| The recovery of Israel's economy from the economic crisis started in the second quarter of 2009, and strengthened in the last four months of the year (the period reviewed): exports surged, domestic demand increased, and a revival in the labor market was evident. That said, activity is still lower than it was prior to the outbreak of the crisis. The continuation of the recovery depends on the pace of the global exit from the recession, regarding which there is uncertainty due to dependence on government rescue programs in many countries which greatly boosted deficits and public debt, and from the difficulties still facing the international financial system. |
| The continued growth of activity in Israel in the period reviewed encompassed most of the principal industries, with manufacturing exports at the forefront as world trade expanded in the wake of the increase in global demand. The increase in the public's wealth, together with the turnaround in the business cycle, the improvement in employment security, and the halting of the erosion in the real wage boosted consumer confidence, and with the help of the low rate of interest led to the continued expansion of private consumption, in particular purchases of durables. Although fixed investment increased, if the investment in land vehicles is deducted––investment which increased greatly as a result of changes in taxation – it showed further decline, a finding consistent with the over capacity in the economy. |
| The labor market also exhibited signs of recovery from the recession, with a slowdown in the contraction of business sector employment, an improved balance of employment (the number of vacancies filled minus terminations of employment)— which became positive in the fourth quarter for the first time in a year—an increase in the number of hours worked per employee, and a rise in the nominal wage. The number of job seekers and claims for unemployment pay fell, and the rate of unemployment dropped. Employers' expectations regarding their activity and their manpower requirements were positive. |
| Evidence of the revival in economic activity was also provided by the improvement in tax revenues from the middle of the year. Direct tax revenues increased with the revitalized activity in the capital market, the improvement in companies' profitability, the increase in the nominal wage, and the expansion in employment; indirect tax revenues increased faster than direct, as private consumption rose. Government expenditure in the reviewed period exceeded the seasonally adjusted amount consistent with full implementation of the budget, in part due to some 2010 expenditure being brought forward. |
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