Business Monitor International


Israel Business Forecast Report

Published 16 December 2014 | Quarterly

  • 53 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Israel Business Forecast Report

Core Views

  • Political risks remain elevated despite a Egypt-brokered truce between Israel and Islamist group Hamas on August 26, as highlighted by protracted violence since the ceasefire. Prime Minister Benjamin Netanyahu is also under increased pressure from within its governing coalition, and we cannot preclude the possibility of early elections. Moreover, risks of spill over effects from the civil war in neighbouring Syria remain high.

Major Forecast Changes

  • We have recently revised our 2014 growth forecast to 1.6% from our previous projection of 2.4%, mainly a result of the seven-week conflict with Islamist group Hamas in the Gaza Strip in July and August. Risks to stability will persist as long as a political solution to the Palestinian issue is elusive, and risks of radicalisation in the West Bank will remain high over the coming quarters. We forecast real GDP growth of 3.1% in 2015, from our previous forecast of 3.3%.

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, macro prudential measures on the part of the government designed to bring down prices have seen a partial cooling of the market, and we do not expect a sharp decrease in prices at this stage.

  • A sharper-than-expected downturn in the global economy would hit Israel's economy badly. Exports have already been hit by stagnant demand in Europe, and lower-than-expected growth in the eurozone would see the outlook for exports deteriorating even further.

Macroeconomic Forecasts (Israel 2012-2015)
Indicator 2012 2013 2014f 2015f
Nominal GDP, USDbn 257.3 290.6 298.3 294.8
Real GDP growth, % y-o-y 3.0 3.2 1.6 3.1
Consumer price inflation, % y-o-y, eop 1.6 1.8 0.1 1.4
Exchange rate ILS/USD, eop 3.73 3.47 3.95 3.85
Budget balance, % of GDP -4.1 -3.3 -3.6 -3.8
Current account balance, % of GDP...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Third Intifada Unlikely, But Increase In Violence Ahead
8
The recent flare-up of violence in Jerusalem will not result in large-scale popular unrest or the resumption of conflict between Israel and
The recent flare-up of violence in Jerusalem will not result in large-scale popular unrest or the resumption of conflict between Israel and
Islamist group Hamas over the coming months
table: Political Overview
8
Long-Term Political Outlook
9
Long-Lasting Peace With The Palestinians Unlikely
9
We do not expect a long-lasting peace agreement between Israel and the Palestinians to be reached over the coming decade
Israel will
also continue to face external security threats from Hizbullah and Iran
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Economy To Recover In 2015
14
Accelerating exports and low base effects will lead to faster real GDP expansion in Israel in 2015, and the economy will continue to
Accelerating exports and low base effects will lead to faster real GDP expansion in Israel in 2015, and the economy will continue to
gather steam over the next five years
On the back of the recent conflict with Islamist group Hamas and prospects for protracted political
violence, we have revised down our 2014 and 2015 growth forecasts
table: Economic Activity
14
table: MENA - Operational Risk
15
Fiscal Policy
16
Government Deficit To Increase In 2015
16
We project Israel's fiscal deficit to come in at 3
4% and
2
That said, public debt will stay under control, shielding the
country from risks of downgrades from credit agencies
table: Fiscal Policy
16
Monetary Policy
17
Policy To Reverse In 2015
17
The Bank of Israel will cut interest rates by 10 basis points in Q414 and maintain ultra-low interest rates in H115
The bank will hike
rates to 0
Banking Sector
18
Stricter Regulatory Framework To Hinder 2015 Profitability
18
Profitability for Israeli commercial banks will be low in 2015 owing to a stricter regulatory framework
Asset growth will also be modest as
central bank policies aimed at limiting mortgages compound lending growth
table: Monetary Policy
18
Currency Forecast
20
ILS: Only Minimal Gains In 2015
20
We see the Israeli shekel remaining weak over the next few months, and forecast it to come in at ILS3
The
domestic factors at play in the recent depreciatory trend will in our view moderate in 2015, and we believe the unit will not weaken much
domestic factors at play in the recent depreciatory trend will in our view moderate in 2015, and we believe the unit will not weaken much
further
table: Currency Forecast
20
table: Exchange Rate
20
Chapter 3: 10-Year Forecast
23
The Israeli Economy To 2023
23
Encouraging Growth Prospects Over The Coming Decade
23
We forecast steady expansion for the Israeli economy over the coming decade, driven by elevated export and gross fixed capital
We forecast steady expansion for the Israeli economy over the coming decade, driven by elevated export and gross fixed capital
formation growth
table: Long-Term Macroeconomic Forecasts
23
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
table: Operational Risk
26
Transport Network
27
table: MENA Transport Network Risks
28
Economic Openness
31
table: MENA - Economic Openness Risk
32
table: Top Five Trade Partners Product Exports (USDmn)
33
table: Top Five Products Imported (USDmn)
33
Chapter 5: Key Sectors
35
Oil & Gas
35
table: Oil Production
36
table: Oil Production
36
table: Gas Production
37
table: Gas Production
37
Petrochemicals
38
table: Petrochemicals Sector, (-000 tpa, unless otherwise stated)
39
Other Key Sectors
41
Table: Pharma Sector Key Indicators
41
Table: Telecoms Sector Key Indicators
41
Table: Defence and Security Sector Key Indicators
41
Table: Infrastructure Sector Key Indicators
42
Table: Food and Drink Sector Key Indicators
42
Table: Autos Sector Key Indicators
42
Table: Freight Key Indicators
42
Chapter 6: BMI Global Assumptions
43
Global Outlook
43
Warning Signs Growing
43
Table: Global Assumptions
43
Table: Developed States, Real GDP Growth, %
44
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
44
Table: Emerging Markets, Real GDP Growth, %
45

The Israel Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Israel and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Israel's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Israel's economic and industry growth through end-2018.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Israel's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Israel, including currency volatility, the commodity price boom and protectionist policies.

The Israel Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Israel economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Israel through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Israel Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2018 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Israel and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Israel, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Israel over the next 5-years?

BMI's Israel country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Israel Market - Political Strengths, Weaknesses, Opportunities and Threats facing Israel.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Israel's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Israel's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Israel, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Israel's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Israel will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Israel's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express