Israel Posted Best Quarter Since 1995 as First Lockdown Ended

(Bloomberg) -- The Israeli economy posted its best quarter since at least 1995, buoyed by a loosening of coronavirus-related restrictions.

Gross domestic product rose a seasonally adjusted, annualized 37.9% in the third quarter, according to the Central Bureau of Statistics. That topped the highest estimate in a Bloomberg survey that had a median forecast of 24%.

The rebound came after output shrank nearly 29% in the three months to June, the worst quarterly showing in at least 45 years, as the country locked down to contain the early spread of the pandemic. By the third quarter, most restrictions had been eased before a surge in infections prompted a second shutdown starting on Sept. 18.

“The economy is resilient and is capable of rebounding rapidly,” said Jonathan Katz, a macroeconomic strategist for Leader Capital Markets Ltd. “More importantly, high-tech service exports boomed.”

Still, the decision to only gradually open from the second nationwide closure “will probably mean that we won’t have that kind of rebound, let’s say, in the first quarter of ’21,” he said.

Third quarter expansion was driven by a 44.6% rise in goods and services exports, a 43.1% jump in business output and a 42% increase in private consumption.

Other factors driving growth included a 7.3% increase in investment and a 5.1% rise for public expenditures. The only sector with a shortfall was goods and services imports, which shrank 6%.

The country is now gradually reopening again after its latest lockdown, with politicians promising restrictions will be lifted more slowly than after the first shutdown. Street shops have reopened, but malls, sit-down dining, hotels and indoor entertainment have not.

Bank of Israel research staff have forecast the economy will shrink between 5% and 6.5% this year depending on the severity of the outbreak.

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