"Israel Business Forecast Report Q1 2013" Is Now Available At Fast Market Research

New Country Reports research report from Business Monitor International is now available from Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 02 February 2013

Core Views - Elevated risks of instability resulting from ongoing tensions between Israel and Gaza have raised political risks, and investors' risk appetite may be tempered by the potential for a spillover of instability in the country.

We see the current account coming in deficit to the tune of 0.8% and 0.3% of GDP in 2012 and 2013 respectively, coming in negative territory for the first time since 2002. The current account's deterioration mainly results from declining export growth.

Major Forecast Changes

Lacklustre external demand and elevated political risks are weighing on the Israeli economy. As a result, we have revised down our forecasts for real GDP growth, and we project Israel's economy expanding by 2.7% and 3.1% in real terms in 2012 and 2013 respectively, compared to our previous forecasts of 2.8% in 2012 and 3.3% in 2013. Fiscal policy will become less supportive over the coming quarters, and leading indicator data bodes poorly for the prospects for private consumption.

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Key Risks To Outlook

House prices in Israel have risen rapidly in recent years, raising concerns that a bubble has formed in the property market. However, an increase in supply, coupled with macroprudential measures on the part of the government designed to bring down prices, have seen the market cooling in the past few months. As a result, a sharp drop in prices is unlikely at this stage.

A sharper-than-expected downturn in the global economy - which could be sparked by a credit event in Europe or a 'hard landing' in the Chinese economy - would hit Israel's economy badly. Exports have already been hit by stagnant demand in Europe and elsewhere, and a further slowdown in external demand would see the outlook for exports deteriorating even further.

Partial Table of Contents:

Executive Summary

Core Views

Major Forecast Changes

Key Risks To Outlook

Chapter 1: Political Outlook

SWOT Analysis

BMI Political Risk Ratings

Domestic Politics

Netanyahu Appears To Be Frontrunner

- Israel's parliamentary elections are anticipated at 22 January 2012, with Prime Minister Benjamin Netanyahu appearing to be the frontrunner at this stage. As the approval of the 2013 budget will be delayed as a result, Israel's budget deficit will remain elevated.

TABLE: ISRAEL POLITICAL OVERVIEW

Foreign Politics

Scenario: What Would An Israel-Iran War Look Like?

- BMI has conducted a scenario for what an Israeli air strike on Iran's nuclear facilities would look like.

TABLE: 2013 SCENARIO FORECAST

TABLE: 2013 SCENARIO FORECAST

Foreign Politics 2

Israel-Gaza Lasting Truce Unlikely

- The November 21 ceasefire between Israel and Gaza will contribute to diminish political risks in the MENA region over the short term.

Foreign Politics 3

Israel-Gaza War: Assessing The Regional Fall-Out

- Israel's military actions against Gaza underscore its perceived need to respond forcefully to the more challenging geopolitical environment that has emerged in recent years.

Long-Term Political Outlook

Will Long-Lasting Peace Be Achieved?

- Over the next decade, Israel will continue to face external security threats from militant groups Hamas and Iran-backed Hizbullah.

Chapter 2: Economic Outlook

SWOT Analysis

BMI Economic Risk Ratings

Economic Activity

Political Risks Slowing Economic Expansion

- We forecast Israel's economy to expand by 2.7% and 3.1% in real terms in 2012 and 2013 respectively, compared to our previous forecasts of 2.8% in 2012 and 3.3% in 2013.

TABLE: ECONOMIC ACTIVITY

Monetary Policy

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