Governor of the Bank of Israel Prof. Stanley Fischer today commented for the first time on the coalition crisis and the possibility that the Olmert government will fall, and its possible impact that this would have on the economy. He made the comments at a meeting with Israeli and French manufacturers.
Fischer said, "We all hear that we have a weak government, but in fact this government has succeeded in maintaining very strong fiscal discipline. I predict that this year's government deficit will be less than projected, only 1% of GDP, or NIS 7 billion, compared with the NIS 12 billion target set by the government."
Fischer added that the Bank of Israel's new growth forecast means that there will be a significant slowdown in growth later this year, even though the growth forecast for the year as a whole is 4.2%. "Even if there is no growth later this year, the high growth in the first quarter will lead to 3.5% growth for the year as a whole," he said.
Fischer continued, "Even with a slowdown in the growth rate, it is still necessary to deal with inflation, and we began to do so last month. We raised the interest rate both a month ago and yesterday, and we said that we will do everything necessary to bring inflation back within the 1-3% target range."
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2008
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