Israel's GDP will contract by 0.1% in 2009, but will grow by 2.4% in 2010, says the IMF in its World Economic Outlook Update, published today to mark the IMF-World Bank Annual Meeting in Istanbul. The IMF's forecast is bleaker than that of the Bank of Israel.
In late August, the Bank of Israel revised its growth forecast upwards from minus 1.5% to zero in 2009, and from 1% to 2.5% growth in 2010.
However, in an international comparison, Israel's growth forecast stands out. The IMF's forecast of a 0.1% GDP contraction is better than its forecasts for all other developed economies, including the US (-2.7%); Euro Bloc (-4.2%); Germany (-5.3%); Japan (-5.4%); South Korea (-1%), and Singapore (-3.3%). The IMF predicts an overall contraction of 3.4% for developed economies as a whole in 2009.
The IMF's growth forecast of 2.4% for Israel in 2010 is also among the fastest rates projected for next year among developed countries. Only five countries are predicted to do better: Singapore 4.1%; Slovakia and Taiwan 3.7% each; South Korea 3.6%; and Hong Kong 3.5%. The IMF predicts that the US economy will grow by 1.5% next year, the Euro Bloc will grow by 0.3%, and Japan by 1.7%.
However, the IMF's growth forecast for Israel pales in comparison with other Middle Eastern countries. All of Israel's neighbors are projected to grow faster in 2009: Egypt 4.7%, Syria and Jordan 3% each; and Lebanon 7%. On the other, Israel is projected to do better than the oil exporters. Kuwait's GDP is projected to contract by 1.5% this year, Saudi Arabia by 0.9%, and the United Arab Emirates by 0.2%. Iran's GDP, however, is projected to grow by 1.5%.
The IMF also predicts that Israel's inflation will be 3.6% in 2009 and 2% in 2010. The Bank of Israel says that 12-month inflation rate through September 2010 will be 2.3%.
The IMF predicts that Israel's unemployment rate will be 8.2% this year, well above the 2008 rate of 6.2%. It also expects the unemployment rate to rise further, to 8.6%, in 2010. This forecast is similar to the projection by Harel Finance chief economist Michael Sarel, formerly the chief economist at the Ministry of Finance. He expects an unemployment rate of 8.1% this year and 8.5% next year.
Ministry of Finance representative in New York Zvi Halamish told "Globes", "The IMF forecast strengthens the optimistic responses we're getting from investors about the Israeli economy. Although exports are not reaching the level from before the crisis, but they're not far off."
Published by Globes [online], Israel business news - www.globes-online.com - on October 1, 2009
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