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Boston, MA -- (SBWire) -- 01/01/2014 --In line with the latest official data, we have downgraded our construction industry growth forecast for Israel in 2013 from 6.2% to 2.4%. This is underpinned by a contraction of 3.2% in the construction industry in Q113 and a decline of 6.3% in gross fixed capital formation (GFCF) in H113.

However, we are more optimistic about the country's prospects over the medium term, as we anticipate construction industry growth of 3.1% in 2014, with growth then expected to average 4.2% between 2015 and 2019. We see fixed investment returning to positive territory in 2014, as well as an expansion in private and government consumption. Our outlook is based on encouraging developments in the energy sector, particularly with regards to offshore gas.

Key developments in Israel's infrastructure sector:

- Israel's National Infrastructure Committee has approved a US$3.2bn programme to electrify 420km of existing and planned railway. The future Acre - Carmiel line and the Tel Aviv - Jerusalem fast line will be the first to be electrified. This investment includes rolling stock and the construction of transformer stations and a control system. The tender is expected to be released in Q114.
- The news that construction has started at the new international airport in Timna raises scope for future forecasts revisions. The proposed airport will replace the existing one in the city of Eilat; it is estimated to cost US$471mn and completion is scheduled for 2016. The airport is part of Israel's ongoing attempt to improve transport links and connect the centre with the south of the country.
- We are also seeing significant developments in the renewables segment of the energy sector. Enlight Renewable Energy was reportedly in talks in September 2013 to help set up one of the largest wind projects in the country. The new development would help enhance the anticipated capacity of the Golan Heights project from 58megawatts (MW) to 100MW.
- The Egyptian army's ousting of President Mohammed Morsi in July 2013 inevitably has repercussions for Israel. In this context, Israel will remain exposed to any further deterioration in the Egyptian political and economic environment, potentially brining further instability.
- The discoveries of significant reserves of natural gas in offshore Israel will enable the country to achieve a high degree of energy independence. We expect a large amount of construction of natural gas-fired power plants in the coming years as production of natural gas is ramped up. Israel's Tamar field has 254 billion cubic metres (bcm) in reserves slated for domestic consumption.

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