The surprise 6.5% annualised contraction in Israeli GDP in Q1 largely reflected the impact of a vehicle tax hike on consumption and a sharp fall in government consumption. We expect GDP to rebound sharply from Q2 onwards as the re-opening of the economy supports activity. But with the economy starting the year on weak footing and an extended military conflict a growing concern, the risks to our forecast for GDP growth of 7.0% this year are skewed firmly to the downside.
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