In 2018, the Israeli economy continued to grow at a rate of 3.2%. In the course of the year, the rate of growth became moderate, the trend changing at the beginning of the second quarter, showing a weaker growth.
The rapid growth in recent years has largely depended on increases in private consumption in Israel. Private consumption has declined since the second quarter of the year, and consequently the growth rate has slowed down. Exports of goods continued to grow moderately, as opposed to rapid growth in exports of services. This reflects the continued increase in the contribution of the high-tech sector to the Israeli economy.
The labor market is at full employment, and unemployment rates are low. Most of the new jobs are concentrated in the public sector, with the business sector having difficulty creating new jobs.
In the last year, salaries have continued to rise as a result of the implementation of the last step of the increase in the minimum wage, and in parallel, the unemployment rate continued to decline. The combination of the two factors contributed to a reduction in inequality and poverty in Israel, with gross inequality declining below the OECD average.
In the last year, inflation has reached its target range, and it is expected to remain at the lower end of the range in the coming year.
In the course of the year, the Bank of Israel raised the interest rate from 0.1% to 0.25%, the first increase since March 2015.
The year 2018 began with stability and even a slight increase in the capital market, but at the end of the year sharp declines resulted in a negative end of the year, which was reflected in a moderate decline in the year-end summary of the Tel Aviv Stock Exchange. The fluctuations in the stock market stemmed from developments in the capital markets around the world, against a backdrop of fears of worsening trade wars, Brexit, and the contraction of money supply in the US.