Boston, MA -- (SBWIRE) -- 07/09/2013 -- Core Views

Political risks remain elevated, with potential for an Israeli military attack on Iran on the rise in 2013. Investors' appetite for risk may be tempered by the possibility of a surge of instability in the country.

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

Major Forecast Changes

We project real GDP growth in Israel to come in at 3.5% in 2013, up from our previous forecasts of 3.1%. Much of this will result from growth in fixed investment as well as declining imports, while private consumption growth will prove slow.

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 government's part 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.

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