Post lockdown, Israel's economy rebounds sharply in Q2

Migrating starlings fly across the sky, in southern Israel
Migrating starlings fly across the sky, in southern Israel December 28, 2015. REUTERS/Amir Cohen/File Photo

JERUSALEM, Aug 16 (Reuters) - The initial success of Israel's COVID-19 vaccination roll-out that enabled an opening of the economy bolstered growth in the second quarter, official figures showed on Monday.

Gross domestic product (GDP) grew at an annual rate of 15.4% in the April-June period from the prior three months, bouncing back from a weak first quarter with big gains in exports, consumer spending and investments.

After posting a better-than-expected 2.6% contraction in 2020, Israel's economy was projected to grow above 5% this year on the heels of a rapid vaccination roll-out that led to a nearly full reopening of businesses after emerging from a third lockdown in mid-March.

Citing risks to the economic recovery from the emerging Delta variant in the COVID-19 pandemic, the Bank of Israel last month trimmed its 2021 economic growth estimate to 5.5% from 6.3%.

Strong economic growth, along with large capital inflows, have underpinned the shekel , which has gained 1% versus the dollar over the last six months.

The gain in gross domestic product growth topped a Reuters forecast of 11% and followed an upward revision to a 1.4% contraction in the first quarter from a previous estimate of a 5.8% decline.

"The sharp rise in the second quarter follows the removal of most of the restrictions imposed due to the coronavirus crisis and a return to near normal economic activity following the contraction in the first quarter due to the corona constraints," the Central Bureau of Statistics said in its GDP report.

It noted an increase in passenger car imports that boosted tax income also contributed to second-quarter growth. Excluding net taxes on imports, GDP grew 12.4% in the quarter.

The opening of the economy led to a decline in the broadest measure of the jobless rate to 8.4% in July from 9.0% in June, the bureau said.

The data show "the Israeli economy is on a rapid recovery trend," said Finance Minister Avigdor Lieberman. "Our investment in preventative steps to avoid another lockdown will lead to a continuation acceleration of growth, an increase in the employment rate and an improvement of productivity."

Fears of a fourth lockdown have risen amid a jump in COVID-19 infections due to the spread of the Delta variant. The government has started a campaign for a third vaccine dose and to inoculate 12-15 years olds in a bid to prevent another lockdown.

In the second quarter, consumer spending rose 36.3%, while exports grew 18.1% and investment in fixed assets gained 9.7%. Imports increased 15.8% and public spending rose 4%.

Reporting by Steven Scheer; Editing by Hugh Lawson and Bernadette Baum

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