Israel's economy grew at an annualised 1.2 percent in the first quarter, its slowest pace in almost two years and less than previously thought, with changes to the way cars are taxed distorting the numbers. In a preliminary estimate last month, the bureau said gross domestic product grew 1.4 percent, well below expectations of 3.7 percent growth.
Fourth-quarter growth had been boosted by one-off factors including a spike in sales of vehicles that occurred before the tax hike - which ties the tax payable at purchase to the car's carbon emissions - at the start of 2017. This also negatively impacted the first three months of 2017.
The bureau revised fourth-quarter GDP growth to an annualised 4.6 percent from 4.7 percent. Analysts said that given the distortions, a more accurate figure was GDP excluding net taxes on import - which eliminates much of the one-time auto effect. It rose an annualised 3.1 percent in the first quarter, revised down from a preliminary 3.3 percent.
Israel's economic growth is projected to slow to a rate of about 3 percent this year from 4 percent in 2016. The January-March quarter saw exports, which comprise more than 30 percent of Israeli economic activity, rise by 7.8 percent, down from a preliminary estimate of 10.6 percent. After strong gains in the first half of 2016, private spending slipped by 1.7 percent while investment in fixed assets dipped by 3.1 percent. Imports fell 9.3 percent while government spending was up 2.6 percent.
Excluding public-sector spending, the economy eked out a 0.3 percent gain in the quarter, compared with a 5.6 percent spurt in the fourth quarter. The GDP data come after the bureau said Israel's annual inflation rate edged higher to 0.8 percent in May from 0.7 percent in April.