How strong is the Israeli economy?

The IMF has just given the Israeli economy a cautious thumbs up. 

Israel passed through the global recession swiftly – the fruit of decisive policies – and strengthened macrofinancial policy frameworks. The challenge now is to sustain growth and low inflation while boosting medium-term prospects – in the context of continued global uncertainty, capital outflows from advanced countries, shekel appreciation and a housing market that is overheating.

So where to next? The “PIIGS fallout” does not help. Exports to these countries are down and there is a US$0.8 billion bank exposure to the region.

On the stats side, unemployment rose slightly this week for the first time in nearly 24 months. And the third quarter saw an unusually sharp fall in manufacturing output, particularly in the pharma sector.

The stock market remains one area of tranquility for investors. Over the past year, it has jumped close to 50%. The top leading 25 companies have seen their combined profits leap forward by 17%.

What does all this mean? The basic fundamentals are in place. However, as the IMF and the Bank of Israel’s continue to shout, this platform needs to be protected, constantly. Rule number one – no giving in to economic and politicl interest groups!

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