The Bank of Israel Research Department sees the central bank's interest rate standing at 0.25% at the end of 2015, and growth in the Israeli economy of 2.3% in 2014 and 3% in 2015. This was the forecast presented by Governor of the Bank of Israel Karnit Flug and members of the bank's Monetary Committee at the quarterly meeting with financial forecasters held last week.
According to the Research Department, most of the indicators show a slowdown in economic activity in the second and third quarters of 2014. In order to stimulate activity and bring the inflation rate up, interest rate cuts or other expansionary measures may be required.
It was also stated at the meeting that recent developments indicate that the rate of growth of public consumption in 2014 and 2015 will be about one percentage point higher than had been projected. Consumption is expected to grow by 4.1% in 2014. The change is mainly due to a rise in defense procurement following the IDF's Operation Protective Edge in the Gaza Strip..
According to the Research Department, Operation Protective Edge reduced growth in GDP by about 0.4%. The main damage was to private consumption and tourism.
Although a decent growth rate is forecast for 2015, the Research Department says that most indicators point to a level of activity below the economy's potential.
Published by Globes [online], Israel business news - www.globes-online.com - on October 5, 2014
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