My economy will slow to under 4% growth! Help?

Yesterday, the Bank of Israel released its revised predictions for 2010 as well as for 2011. The economy will leap forward by only 3.8% next year, and that “lowish” estimate even allows for a downturn in orders from Europe and America.

How many finance ministers and bank chiefs in the OECD would settle for even half of that?

The Israeli economy is doing well. For 2010: –

  • Exports will jump up 11% (compared to a 10.2% dip in 2009)
  • Unemployment will drop to 6.3% (7.6%)
  • Personal consumption has soared by over 5% (1.7%)
  • Commercial gas (and maybe oil) supplies have been confirmed
  • OECD membership has begun to generate new sources of investment

There are still headaches for the planners. As the economy moves ahead and the housing market is bubbling, the central bank is using interest rates to curb the demand. But a higher cost of money will pull the shekel stronger, and thus weakening the profitability of exports. An awkward balancing act.

In parallel, the economy is dependent on export markets overseas. Again, while America, the UK and others are moving in the right direction, the progress is fragile. A potential Portuguese or Irish financial crisis could knock many off balance. And Israel will catch some of that fall out.

Avi Temkin in “Globes” newspaper wrote an interesting into to a piece on the economy.

Next week when Governor of the Bank of Israel Prof. Stanley Fischer travels to Washington D.C. for the annual meeting of the International Monetary Fund, he will be envied by many of the other central bank chiefs. ………. Fischer can mingle among the other central bank heads with an imaginary tag around his neck saying “2% interest rate and still rising.”

…and still in control.

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One Comment on “My economy will slow to under 4% growth! Help?”

  1. […] Israel’s economic progress, despite a global recession, has been well documented and described. The economy is expected to grow at 4% in 2010 for all the hangover of the credit crunch and […]

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