Israel to revise economic forecasts upwards

Haim Shani, the new Director General of Israel’s Ministry of Finance, is a very lucky man. He comes in to the job, as the worst of the global recession is safely in the past. The country faces no immediate elections which tend to destabilise the economy. A budget for 18 months has been secured.

Best of all, Shani replaces Yoram Ariav, who leaves behind a well-run ship.  So, what is there to look forward to?

Shani is a successful CEO of one of Israel’ leading hightech giants, NICE. He is set to release new growth predictions for the year 2010, which will be revised upwards towards the 3% mark. The previous forecast was about half of that. This means a significant shrinking in the expected public deficit, and so to an easier monetary regime.

As a side note, amny ministers will try to claw back the cuts in the budgets as tax collection has started to rise again.

It will be interesting to see how the Bank of Israel reacts to the positive trends. Its main concern is future inflation. The annual target is 2.0%, although the current rate is close to 3.5%.

Stanley Fisher, the  bank’s governor, is known to be encouraging other international financiers to follow his lead, as he has already raised interest rates.  More of the same is expected. It is a question of how much and when.

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