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Economic Reports

Investor's Review

Issue No. 122
December 2014

Israel Macro Economic Review


Economic activity declined in the third quarter due to Operation
Protective Edge; but the use of resources increased. What will be in
the rest of the year and in 2015?

Local economic activity declined by a real rate of 0.4% in the third
quarter of 2014 compared to the second quarter (in annualized terms,
excluding seasonality). The business sector product, which excludes
the contribution of government expenditure to the GDP as well as other
relatively small components of activity, fell by a sharper rate of 1.4%.
The decline in activity, its extent and composition, were in-line with
expectations and stemmed primarily from the economic consequences
of Operation Protective Edge. This was similar to economic developments
that occurred during previous periods of military action in Israel. It should
be noted that the rate of decline in activity in the third quarter of this year
was moderate compared to the rates of decline during previous periods
of military action, due to, among other things, the fact that the rate of
economic growth in the quarter that preceded the fighting was low (no
decline in economic activity occurred during Operation Pillar of Defense
because the fighting concluded after a relatively short period of only one


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