​Summary:

  • GDP grew by a somewhat lower rate in 2008 than in the previous years. In the first part of the year, growth slowed as the economy approached full employment while in the latter part of the year business sector product contracted as a result of the financial crisis and the global slowdown that led to a drop in domestic and international demand. 
  • Global economic developments dominated the Israeli economy this year. These included a sharp transition from boom to recession in the developed countries, which was accompanied by the collapse of several major financial institutions and the precipitous drop in asset values worldwide. 
  • Surplus demand, which first appeared in the previous year, began to grow during the first part of the year. Employment and the capital stock grew rapidly, which was accompanied by a slight drop in productivity, an increase in inflation and an appreciation in the real exchange rate. Towards the end of the year, the trend was reversed with a sharp drop in demand and an increase in the rate of unemployment, as well as a real depreciation and a decrease in inflation.  
  • During the first part of the year, the shekel strengthened significantly, which was a continuation of the real appreciation that began in 2007. The magnitude of the appreciation was larger than could be explained only by economic developments and indeed there was a depreciation at the end of the year which offset the over-appreciation.  
  • The rate of growth in private consumption slowed as a result of the uncertainty regarding the future economic situation and the drop in the value of financial assets. Current consumption grew moderately during the course of the year while the purchases of durable goods dropped precipitously.  
  • Exports were significantly affected by the global slowdown. The export of services began to contract already in the second quarter of the year while manufacturing exports fell only in the fourth quarter. The increase in exports during the course of the year was primarily due to the chemical and petroleum industry, while the other industries began to stagnate at an earlier stage.  
  • The drop in manufacturing exports was the result of a number of domestic and international economic developments: the decline in global demand, the continued worsening in the terms of trade and the real appreciation.  
  • There was a slowdown in the rate of growth in the construction sector this year and residential housing starts, though they stabilized this year, reflected a downward trend in public construction since the beginning of the decade and stability in private construction. The stability in private construction, together relative price stability until last year, reflected the balance between demand and supply forces. This year saw a turnaround in the prices of rented and owned housing, which increased following a prolonged downward trend.  
  • The slowdown in the economy, particularly during the second half of the year, was also manifested in the commerce and service industries.  


GDP, Uses and Principal Industries - Full File