Israel Infrastructure Report 2008

After years of slow and negative growth, Israel's construction industry has started picking up lately.

Investments in the construction industry have been increasing due to private participation in infrastructural projects. BMI forecasts an average growth rate of the construction sector of 7% during 2008-2012.

Israel is witnessing increased investment in infrastructure projects through the build-operate-transfer (BOT) route due to renewed investor confidence. In H107, Israeli GDP increased at an annual rate of 6.6%. Private consumption led by increasing wages and employment opportunities has been the main driver of economic growth, along with rising consumer confidence and tax cuts. Major infrastructure projects under way or on the anvil include a US$590mn Jubilee port in Ashdod, US$160mn extension of the Trans Israel Highway, and a US$1bn solar power station in the Negev desert.

However, Israel's war with Lebanon and the ongoing Palestine issue have had an adverse impact on its economy. Increased war expenditure has led to major reductions in budgetary allocations to other sectors of the economy. The government has reduced expenditure on Israel Railway's plans. Labour shortages and frequent delays lead to crucial infrastructure projects being delayed by years.

Despite this, strong trading ties with the US and Europe and a highly educated and skilful workforce indicate growth of the Israeli economy in the future as well. The precarious security situation has been dealt with strongly by Israel and no solution appears imminent. Growth in other sectors of the economy has led to increasing investments in the construction sector. The hotel industry is garnering investments after almost a decade of no activity, as new land lots are being sold to fulfil the demand from the Israeli population for hotels as well as the increasing business and tourist influx.